1 2020 I Important Notice, Table of Contents and Definitions The board of directors (the “Board”), the supervisory committee (the “Supervisory Committee”) and the director

INTERIM REPORT 2020

(a joint stock company incorporated in the People’s Republic of China with limited liability)

Stock Code: 1812

1SHANDONG CHENMING PAPER HOLDINGS LIMITEDINTERIM REPORT 2020

I Important Notice, Table of Contents and Definitions

The board of directors (the “Board”), the supervisory committee (the “Supervisory Committee”) and the directors (the “Directors”), supervisors (the “Supervisors”) and senior management (the “Senior Management”) of the Company hereby warrant the truthfulness, accuracy and completeness of the contents of the interim report, guarantee that there are no false representations, misleading statements or material omissions contained in the interim report, and are jointly and severally responsible for the liabilities of the Company.

Chen Hongguo, head of the Company, Dong Lianming, head in charge of accounting, and Zhang Bo, head of the accounting department (Accounting Officer), declare that they warrant the truthfulness, accuracy and completeness of the financial report in the interim report.

All directors have attended the board meeting to review this report.

The Company is exposed to various risk factors such as macro-economic fluctuation, adjustment of state policy and competition in the industry. Investors should be aware of investment risks. For further details, please refer to the risk exposures of the Company and the measures to be taken to address them as set out in Discussion and Analysis of Operations.

The Company does not propose distribution of cash dividends or bonus shares, and there will be no increase of share capital from reserves.

2 SHANDONG CHENMING PAPER HOLDINGS LIMITEDINTERIM REPORT 2020


Table of Contents

I Important Notice, Table of Contents and Definitions 1

II Company Profile and Key Financial Indicators 4

III Business Overview 7

IV Discussion and Analysis of Operations 14

V Material Matters 23

VI Changes in Share Capital and Shareholders 41

VII Preference Shares 46

VIII Directors, Supervisors and Senior Management 48

IX Corporate Bonds 49

X Financial Report 53

XI Documents Available for Inspection 192



DefinitionsItem means Definition

Company, Group, Chenming Group or Chenming Paper

means Shandong Chenming Paper Holdings Limited and its subsidiaries

Parent Company or Shouguang Headquarters

means Shandong Chenming Paper Holdings Limited

Chenming Holdings means Chenming Holdings Company Limited

Shenzhen Stock Exchange means Shenzhen Stock Exchange

Stock Exchange means The Stock Exchange of Hong Kong Limited

CSRC means China Securities Regulatory Commission

Zhanjiang Chenming means Zhanjiang Chenming Pulp & Paper Co., Ltd.

Jiangxi Chenming means Jiangxi Chenming Paper Co., Ltd.

Wuhan Chenming means Wuhan Chenming Hanyang Paper Holdings Co., Ltd.

Shanghai Chenming means Shanghai Chenming Industry Co., Ltd.

Huanggang Chenming means Huanggang Chenming Pulp & Paper Co., Ltd.

Chenming (HK) means Chenming (HK) Limited

Jilin Chenming means Jilin Chenming Paper Co., Ltd.

Shouguang Meilun means Shouguang Meilun Paper Co., Ltd.

Chenming Sales Company means Shandong Chenming Paper Sales Company Limited

Finance Company means Shandong Chenming Group Finance Co., Ltd.

Chenming Leasing means Shandong Chenming Financial Leasing Co., Ltd. and its subsidiaries

Hongtai Real Estate means Shanghai Hongtai Real Estate Co., Ltd.

GDR Fund means Weifang Chenming Growth Driver Replacement Equity Investment Fund Partnership (Limited Partnership)

Chenrong Fund means Weifang Chenrong Growth Driver Replacement Equity Investment Fund Partnership (Limited Partnership)

Corporate Bonds means 18 Chenming Bond 01 and 17 Chenming Bond 01

Preference Shares means Chenming You 01, Chenming You 02 and Chenming You 03

Perpetual Bonds means 17 Lu Chenming MTN001 and 17 Lu Chenming MTN002

B shares means Chenming B

Grant Thornton means Grant Thornton (Special General Partnership)

reporting period means The period from 1 January 2020 to 30 June 2020

the beginning of the year or the period

means 1 January 2020

the end of the interim period or the period

means 30 June 2020


II Company Profile and Key Financial Indicators

I. Company profile

Stock abbreviation 晨鳴紙業 Stock code 000488晨鳴B 200488晨鳴優01 140003晨鳴優02 140004晨鳴優03 140005

Stock exchanges on which the shares are listed Shenzhen Stock ExchangeStock abbreviation Chenming Paper Stock code 01812Stock exchanges on which the shares are listed The Stock Exchange of Hong Kong LimitedLegal name in Chinese of the Company 山東晨鳴紙業集團股份有限公司

Legal short name in Chinese of the Company 晨鳴紙業

Legal name in English of the Company (if any) SHANDONG CHENMING PAPER HOLDINGS LIMITEDLegal short name in English of the Company (if any) SCPHLegal representative of the Company Chen Hongguo

II. Contact persons and contact methods

Secretary to the Board Hong Kong Company Secretary

Name Yuan Xikun Chu Hon LeungCorrespondence

AddressNo. 2199 Nongsheng East Road, Shouguang City, Shandong Province

22nd Floor, World Wide House, Central, Hong Kong

Telephone 0536-2158008 +852-21629600Facsimile 0536-2158977 +852-25010028Email address [email protected] [email protected]

III. Other information

1. Contact methods of the Company

Whether the registered address, office address, postal code, website, email of the Company changed during the reporting period

□ Applicable √ Not applicable

There was no change of the registered address, office address, postal code, website and email of the Company during the reporting period. Please refer to 2019 Annual Report for details.

2. Information disclosure and places for inspection

Whether the information disclosure and places for inspection changed during the reporting period


There was no change of the newspapers designated by the Company for information disclosure, designated websites for the publication of the interim report as approved by CSRC and places for inspection of the Company’s interim report during the reporting period. Please refer to 2019 Annual Report for details.



IV. Major accounting data and financial indicators

Retrospective adjustment to or restatement of the accounting data for prior years by the Company

□ Yes √ No

The reporting period

The corresponding period of

the prior year

Increase/decrease for the reporting

period as compared to the corresponding

period of the prior year

Revenue (RMB) 13,599,805,765.86 13,348,648,113.70 1.88%Net profit attributable to shareholders of the Company (RMB) 516,326,703.48 509,795,572.29 1.28%Net profit after extraordinary gains or losses attributable to

shareholders of the Company (RMB) 67,882,116.23 303,144,996.21 -77.61%Net cash flows from operating activities (RMB) 2,327,033,784.68 2,699,770,891.69 -13.81%Basic earnings per share (RMB per share) 0.051 0.013 292.31%Diluted earnings per share (RMB per share) 0.051 0.013 292.31%

Rate of return on weighted average net assets 0.84% 0.21%Increase by 0.63 percentage point

As at the end of the reporting period

As at the end of the prior year

Increase/decrease as at the end of the

reporting period as compared to the

end of the prior year

Total assets (RMB) 99,034,079,672.06 97,958,909,935.15 1.10%Net assets attributable to shareholders of the Company (RMB) 24,907,632,671.76 25,169,743,863.75 -1.04%

Data description of basic earnings per share, diluted earnings per share, and rate of return on weighted average net assets:

Net profit attributable to shareholders of the Company does not exclude the effect on interest of perpetual bonds and the dividends on preference shares paid and declared to be paid. When calculating financial indicators such as earnings per share and the rate of return on weighted average net assets, the interest on perpetual bonds from 1 January 2020 to 30 June 2020 of RMB96,734,246.58 and the dividend on preference shares paid and declared to be paid in 2020 of RMB270,776,073.42 are deducted.



V. Differences in accounting data under domestic and overseas accounting standards

1. Differences between the net profit and net assets disclosed in accordance with international accounting standards and China accounting standards in the financial report


There was no difference between the net profit and net assets disclosed in accordance with international accounting standards and China accounting standards in the financial report during the reporting period.

2. Differences between the net profit and net assets disclosed in accordance with overseas accounting standards and China accounting standards in the financial report


There was no difference between the net profit and net assets disclosed in accordance with overseas accounting standards and China accounting standards in the financial report during the reporting period.

3. Reasons for differences in accounting data under domestic and overseas accounting standards


VI. Items and amounts of extraordinary gains or losses

√ Applicable □ Not applicable

Unit: RMB

Item Amount Explanation

Profit or loss from disposal of non-current assets (including write-off of asset impairment provision) 13,758,306.22

Government grants accounted for in profit or loss for the current period 767,184,012.96Change in fair value of consumable biological assets/change in fair value of other

non-current financial assets -9,246,743.86Non-operating income and expense other than the above items -2,416,979.09Subtotal 769,278,596.23Less: Effects of income tax 179,535,882.21Effects of non-controlling interests (after tax) 141,298,126.77

Total 448,444,587.25

Notes for the Company’s extraordinary gain or loss items as defined in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 – Extraordinary Gains or Losses and the extraordinary gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 – Extraordinary Gains or Losses defined as its recurring gain or loss items


No extraordinary gain or loss items as defined or illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No. 1 – Extraordinary Gains or Losses were defined by the Company as its recurring gain or loss items during the reporting period.


III Business Overview

I. Principal activities of the Company during the Reporting PeriodWhether the Company needs to comply with the disclosure requirements of specific industries

No

(I) Principal activities of the Company during the reporting period

1. Business overviewThe Company is a large integrated conglomerate principally engaged in pulp production and paper making. The Company is the only listed company with A shares, B shares and H shares in China. Its key indicators in respect of business and economic efficiency have been in a leading position in the industry in China for over 20 consecutive years. The machine-made paper business is the principal activity and the major source of revenue and profit of the Company. During the reporting period, there was no significant change in the principal activity of the Company.

The Company has committed itself to implementing a forestry, pulp and paper integration strategy, introduced world-leading pulp production and paper making technology and equipment. Its product series include high-end offset paper, white paper board, coated paper, light weight coated paper, household paper, electrostatic copy paper and thermal paper, with each major product ranking among the highest in terms of market share in China, with duplex press paper and electrostatic paper ranking first and white paper board and coated paper ranking second in their respective markets. The Company has scientific research institutions including the national enterprise technology centre, the postdoctoral working station as well as state certified CNAS pulp and paper testing centre and has obtained 232 national patents including 19 patents for invention, with 7 products selected as national new products. The Company has obtained 14 science and technology progress awards above the provincial level and undertaken five national science and technology projects and 62 provincial technological innovation projects. The Company has pioneered to obtain the ISO9001 quality certification, ISO14001 environmental protection certification and FSC-COC certification among its industry peers.

2. Main products

Category Major brands and typesCharacteristics of

products Product illustration Range of application

Culture paper BIYUNTIAN, CLOUDY MIRROR, and CLOUDY LEOPARD all-wood pulp offset paper; “CLOUDY LION” and “CLOUDY CRANE” offset paper; a n d “ C E D A R ” a n d “ G R E E N P I N E” l i g h t weight paper.

High whiteness, good stiffness, high intensity index, smooth surface, accurate registering and clear printing.

Sui table for pr int ing publications, textbooks, magaz i nes , cove r s , illustrations, notebooks, test papers, teaching mater ia ls , re ference books, etc.

Coated paper “SNOW SHARK” and “ E A G L E ” o n e - s i d e d coated paper; “SNOW S H A R K ” , “ E A G L E ” , “RABBIT” and “SNOW S W A L L O W ” d o u b l e -sided coated paper, and EAGLE, RABBIT and SNOW SWALLOW matte coated paper

Good glossiness and bulk, high stiffness and printing quality grade; even and fine coating, good reduction for the printing dot and bright colour; and high intensity, good whiteness, strong l a y e r i n g s e n s e a n d verisimilitude image.

Double-side coated paper is suitable for high quality printing, such as high-grade picture albums, picture, magazines and so on. One-side coated paper is suitable for large format printing and business printing, such as upscale tobacco package paper, adhesive sticker, shopping bags, slipcases, envelopes, gift wrapping and so on.

White cardboard

White cardboard and ivory cardboard of ZITAN s e r i e s a n d P O P L A R series, super high bulk cardboard, Chenming cigarette cardboard, fluid inclusion cardboard, and base paper for mugs.

Consistent substance and callipers, high bulk w i t h good s t i f f ness , good die-cutt ing box p e r f o r m a n c e ; h i g h whiteness, stable hue, even and fine coating, good reproduct ion of printing dot, smooth and fine paper surface, high folding endurance, in favour of securing bulking without damage.

High-end gift boxes, cosmetics boxes, tags, shopping bags, publicity pamphlets, high-end postcards; c igaret te package pr in t ing o f medium and high quality; milk package, beverage package, disposable paper cups, milk tea cups, and noodle bowls.



Category Major brands and typesCharacteristics of

products Product illustration Range of application

Light weight coated paper

Jinzhou high-grade light we ight coated paper and refined light weight coated paper

The brightness of product and printing is high, and the pr in ted products are bright and beautiful; and the paper has good uniformity, good bulk, high opacity, and clear print dot.

M a i n l y s u i t a b l e f o r printing advertisements, high-end publications, magazine inner pages, and p icture a lbums; suitable for high-speed sheet-fed press or high-speed ro ta ry speed press.

Industrial paper High-grade yellow anti-s t ick ing base paper , ordinary yel low/white anti-sticking base paper, b i l l base paper , cast coated base paper, PE paper, str ipping base paper, and white kraft paper

Good evenness, h igh bursting strength, good sur face smoothness, a n d c o m p o u n d a n d c r o s s c u t t i n g performance.

Anti-stick base paper i s m a i n l y u s e d f o r producing the paper base of stripping paper or anti-st icking base pape r . Cas t coa ted base paper is suitable for producing adhesive p a p e r o r p l a y c a r d compound paper after coating.

Copy paper GOLDEN MINGYANG a n d G O L D E N C H E N M I N G c o p y p a p e r , B O Y A a n d BIYUNTIAN copy paper, M I N G Y A N G , L U C K Y CLOUDS, BOYANG, and SHANYIN copy paper, and GONGHAO, and TIANJIAN copy paper

S o f t w h i t e n e s s a n d visually comfortable; flat and smooth sur face , and clear writ ing and vivid colour in printing and copying; suitable for double-sided use, energy saving and environmental protection; and durable pr in t ing and copy ing effect.

Sui table for pr int ing and copying business documents , t ra in ing materials, and writing.

Special paper T h e r m a l p a p e r a n d glassine paper

High density of colour d e v e l o p m e n t , c l e a r coloration; made of base paper of all wood pulp, g o o d i n a p p e a r a n c e a n d t e x t u r e ; s t r o n g surface intensity, good adaptability to printing and processing; good wear resistance, non-stick to printing head, stable quality; smooth and f ine surface; and high-grade.

M a i n l y u s e d i n electronics, medicine, food, washing supplies, supermarket labe ls , double-sided tape and other high-end adhesive base paper.

Household paper

T o i l e t p a p e r , f a c i a l t issue, pocket t issue, napkin, paper towels, “ X I N G Z H I L I A N ” , “FOREST LOVE”, and “BEIYING”

Fine Wrinkles and good water absorption; soft and comfortable enough for maternal and infant skin; and fine wrinkles, and good feeling without scraps after wiping.

Dai ly toi let suppl ies; used in restaurants and other catering industries, and used in public toilets in hotels, guesthouses, and office buildings, and also suitable for home and other environment.

I. Principal activities of the Company during the Reporting Period (Cont’d)

(I) Principal activities of the Company during the reporting period (Cont’d)

2. Main products (Cont’d)




(I) Principal activities of the Company during the reporting period (Cont’d)

3. Operation model(1) Purchase model

The Company strives to promote the construction of procurement information systems, establishes an enterprise network bidding platform, improves the contract management module, optimises the SAP three-level authority approval process, and effectively establishes a standardised procurement management system. Meanwhile, the Company cooperates with financial institutions and third parties in the supply chain financial business to enhance business reputation, establish synergistic relationships, leverage core enterprise scale advantages, and improve the competitiveness of the supply chain.

(2) Production modelThe Company strives for a new production model with high technology content, low energy consumption and less pollution. It puts great efforts in the implementation of green low-carbon strategy. In addition, the Company endeavours to facilitate business development in line with ecological development, enhance its competitiveness in economic development and environmental protection, and establish its economic and ecological culture.

The Company adheres to the clean production model and relies on advanced production technology and manufacturing equipment to achieve low emissions with low consumption and achieve the reduction in consumption through recycling. The Company adheres to energy conservation and emission reduction, and pays close attention to the “three wastes” treatment. The Company has built a wastewater treatment system and middle water reuse system, establishing itself as a resource-saving and environmentally friendly benchmarking enterprise. The Company adheres to the forestry, pulp and paper integration strategy with the four major projects put into operation, which effectively alleviates the pressure on raw materials and improves its core competitiveness.

(3) Marketing modelThe Company has a mature sales network, and has set up specialised sales companies responsible for the development of domestic and overseas markets and product sales. The Company has changed its sales network from regional division to product line division in order to provide more professional sales services. The sales companies are divided into product companies of cultural paper series, coated paper series and household paper series according to product line. Each product company has its administrative district. A regional general manager is responsible for his administrative district, under which branch companies are set up. The chief representatives of the branch companies have full authority to deal with branch business.

The Company has innovated a three-level scheduling mechanism for implementation. Branch offices, administrative districts, and sales companies assign specialised personnel to schedule task indicators daily to ensure the effective implementation of the plans.

(4) Research and development management modelThe Company has strong research and development capabilities, which rank among the first in the industry. The Company has set up scientific research institutions including a national enterprise technology centre, the postdoctoral working station as well as state certified CNAS pulp and paper testing centre and Shandong Pulp and Paper Making Laboratory. In addition to its own technological innovation, the Company has also established technology development and talent training cooperation relationships with institutions of higher learning and research institutes such as Nanjing Forestry University, Qilu University of Technology, Qingdao University of Science and Technology and China National Pulp and Paper Research Institute Co., Ltd.

The Company has obtained 252 national patents including 19 patents for invention, with 7 products selected as national new products. The Company has obtained 15 science and technology progress awards above the provincial level and undertaken 5 national science and technology projects and 62 provincial technological innovation projects.

(II) Performance drivers

1. Prominent industry concentrationProminent industry environmental protection policies have been issued intensively in recent years, which further phases out outdated production capacity, and significantly increases industrial concentration. The elimination of outdated production capacity provides scope for concentration among leading enterprises. With strong financial strength, advanced production equipment and economies of scale in production, large paper making enterprises in the industry continue to increase entry barriers and enjoy huge profits from the industry’s new profit cycle. The industry will continue to boom.

2. Perfect marketing model and leading market share in ChinaThe Company has a mature sales network, and has set up specialised sales companies responsible for the development of domestic and foreign market and, product sales. Relying on the customer resources established for many years and good sales networks, the Company has successfully expanded its overseas markets.

At present, the Company offers the widest product range in the paper making industry, and its major products, including duplex press paper, electrostatic paper, white paper board and coated paper ranking among the highest in terms of market share in China.




(II) Performance drivers (Cont’d)

3. Focus on principal activities to achieve perfect complementary pulp and paper production capacityThe paper making industry is a large-scale industry with large inflows and outflows. Whoever controls the raw materials has the market initiative. As the chemical wood pulp projects of Huanggang Chenming and Shouguang Meilun commence production, the Company currently has three major pulp mills in Zhanjiang, Huanggang and Shouguang. It has become the first domestic paper making enterprise to have fully complementary pulp and paper production capacity, and has absolute competitiveness in terms of cost.

As environmental protection inspections by the National Development and Reform Commission and the Ministry of Environment become a long-term and common practice, and environmental protection production restriction policies are implemented based on classification and hierarchy, import quotas for waste paper continue to tighten. Against the backdrop of the waste paper import ban which will be implemented by the end of 2020, the forestry, pulp and paper integration strategy of the Company starts to work gradually. However, at present, the advantages of the Company’s self-produced pulp have not been fully utilised, and there is still much scope and potential for development. As the market price of wood pulp gradually rebounds, the core advantages of the Company’s pulp and paper balance will be further brought into play, and corporate efficiency will be greatly improved.

4. Strong research and development capabilitiesSince recent years, the Company had been closely following the economic and market conditions in China and in the industry. Driven by customers’ demand with a view to enhancing economic benefits, the Company continued to put more efforts into technical innovation and developed new technology-based products with more economic benefits. The Company was also committed to researching and developing for the purpose of product differentiation and refining. 5 R&D projects including the “technology development of highly stiff book and paper” and “technology development of coated paper for high temperature labels” were listed on the technological innovative project plans of Shandong Province. The Company also collaborated with Qilu University of Technology for industry-university innovation, and their organised and declared “Key Technology and Application of Green Preparation of High Performance Wood Chemical Pulp” was awarded the First Prize of Science and Technology Progress Award by the Ministry of Education. The new products and new achievements including the “high-end social cardboard” and the “baby base paper” were awarded three Excellent New Product and Outstanding Achievement Second Prizes in the 2019 Shandong Province Technological Innovation Award. Meanwhile, the Company strengthened the protection of intellectual property rights. In 2019, the Company applied for 19 patents and obtained 26 licences, which accelerated the restructuring of its product mix and facilitated the corporate restructuring and upgrade.

5. Strengthening social responsibility works and fulfilling environmental protection obligationsAs a leading paper making enterprise in China, the Company has the world’s most advanced paper making production lines. While ensuring production efficiency and product quality, the Company always adheres to the concept of “placing green development and environmental protection as the first” and regards environmental protection as a life project. As at the date of this report, the Company has invested more than RMB8,000 million in environmental protection projects. The Group has comprehensively implemented environmental protection governance, actively promoted clean production, vigorously implemented energy conservation and emission reduction, and embarked on the road of green, clean, and low-carbon development. At present, the Company adopts the world’s most advanced “ultrafiltration membrane+reverse osmosis membrane” technology to complete the reclaimed water recycling membrane treatment project. The reclaimed water recycle rate reaches more than 75%. The reclaimed water quality meets drinking water standards, which can save fresh water every day 170,000 cubic metres.

The Company is the first to obtain ISO14001 environmental management system certification among its industry peers in China. The Company has been named the environmental friendly enterprise, the recycling economy exemplary enterprise, the outstanding energy efficiency unit, Environmentally Friendly Enterprise of Shandong Province, Circular Economy Demonstration Enterprise of Shandong Province, Advanced Unit for Saving Efficiency of Shandong Province and the outstanding unit in comprehensive utilisation of resources of Shandong Province, which reflects its outstanding achievements in both economic development and environment protection. Zhanjiang Chenming was awarded the title of “Green Factory” by the Ministry of Industry and Information Technology in 2019.



II. Material Changes of Major Assets

1. Material Changes of Major Assets

Major assets Description

Equity During the reporting period, the Company made additional investment in Chenrong Fund.

Fixed assets During the reporting period, the assets of the pulping project and biomass power generation project of Huanggang Chenming were transferred.

Construction in progress

During the reporting period, the assets of the pulping project and biomass power generation project of Huanggang Chenming were transferred.

Financial leasing assets

During the reporting period, the Company continuously reduced the scale of the financial leasing business, with net recovery of RMB1,056 million.

Inventories During the reporting period, inventories of the Company increased due to the COVID-19 epidemic.

2. Major Assets Overseas


III. Analysis of liquidity, financial resources and capital structure disclosed in accordance with the listing rules of the Hong Kong Stock Exchange

As at 30 June 2020, the Group’s current ratio was 82.81%. The quick ratio was 72.80%. The gearing ratio was 73.49%.

There was no significant seasonal trend for capital requirements of the Group.

The Group’s sources of capital primarily came from cash inflow generated from operating activities, borrowings from financial institutions, public issuance of corporate bonds in the capital market, as well as issuance of privately placed bonds, medium-term notes and short-term commercial paper in the interbank market.

As at 30 June 2020, the total bank borrowings, corporate bonds, short-term commercial paper and medium-term notes of the Group were RMB49,527 million, RMB1,628 million, RMB151 million and RMB3,384 million, respectively (as at the end of the prior year: the total bank borrowings, corporate bonds, medium-term notes and short-term commercial paper of the Group were RMB48,544 million, RMB2,157 million, RMB3,043 million and RMB222 million, respectively). As at 30 June 2020, the Group had monetary funds of RMB19,302 million (as at the end of the prior year: RMB19,307 million) in total (For the breakdown of monetary funds, please refer to X. VII. 1 Note on Monetary Funds in this report).

To strengthen its financial management, the Group established and optimised its strict internal control system on cash and capital management. The liquidity and repayment ability of the Group were in a good condition. As at 30 June 2020, the Group had 12,649 employees. The total staff remuneration for the first half of 2020 amounted to RMB632.5982 million (The Group had 13,677 employees in 2019. The total staff remuneration for 2019 amounted to RMB1,348.4511 million).

There will be no major investment project of the Company during the second half of 2020.

The Company’s existing bank deposits were primarily used for production and operation, construction projects and investment in technology research and developments.

For details of the assets with restricted ownership of the Group as at 30 June 2020, please refer to X. VII. 62. Details of assets with restricted ownership or right to use in this report.

For details of the contingent event required to be disclosed by the Group as at 30 June 2020, please refer to X. VII. 34 Provisions.



IV. Analysis of Core Competitiveness

Whether the Company needs to comply with the disclosure requirements of specific industries

No

The Company is a leading player in the paper making industry of China. After innovation and development for more than half a century, it has developed into a large integrated conglomerate principally engaging in pulp production and paper making. It is also the first company in the paper making industry to own a financial company, as well as the only listed company in China with three types of shares in issue, namely A shares, B shares and H shares. Compared with other enterprises in the industry, the Company has the following advantages:

1. Advantages of pulp and paper integration

The Company has basically enjoyed wood pulp self-sufficiency due to the completion of the pulp and paper integration layout. During the reporting period, the Company had 4,300,000-tonne wood pulp production capacity on its own. Self-produced pulp enjoys significant cost advantage over purchased wood pulp, which enables the gross profit of the Company’s paper products to consistently rank among the top of the industry; on the other hand, the price of wood chips, the raw material for pulp making, is relatively stable. Therefore, the procurement advantage of bulk supplies and the application of ancillary logistics services have significantly reduced the logistics and transportation costs of raw material and finished products, considerably increasing the Company’s cost advantage and quality stability.

2. Scale advantages

After years of development, the Company, being a leading player in the paper making industry in China, has achieved annual pulp and paper production capacity of over 11 million tonnes and is capable to compete with international paper making enterprises in scale. The large-scale centralised production and operation model has provided the Company with obvious economic benefits. The Company also has strong market influence over raw material procurement, product pricing and industry policymaking.

3. Product advantages

The Company has implemented the “forestry, pulp and paper integration” strategy, introduced world-leading pulp and paper production technology, and set up the largest integrated forestry, pulp and paper project with the most advanced technology in the world. The Company is the enterprise that offers the widest product range in the paper making industry, and its five largest product series include high-end offset paper, white paper board, coated paper, light weight coated paper, household paper, electrostatic copy paper, thermal paper and glassine paper, with each major product ranking among the best in terms of market share.

4. Advantages in technical equipment

Currently, the Company has the largest integrated forestry, pulp and paper project with the most advanced technology in the world and dozens of pulp and paper production lines of international advanced standards. The Company’s overall technical equipment has reached the advanced international level. The major production equipment has been imported from internationally renowned manufacturers, including Valmet, Ahlstrom and Metso of Finland, Voith of Germany and TBC of the United States.

The technical equipment used by the Company generally reflects the characteristics of being technology-intensive and the integration of mechanical and electrical in the paper making industry nowadays. The degassing technology, wet end chemical technology, intelligent sheet lateral control technology, coating preparation technology, free-jet coating technology, multi-nip pressure balanced calender technology and the technical processes independently developed by the Company of the pulp systems have all reached the international advanced level.



IV. Analysis of Core Competitiveness (Cont’d)

5. Advantages in research and innovation and new product development

The Company, Zhanjiang Chenming, Shouguang Meilun, Jiangxi Chenming and Jilin Chenming are high and new-technology enterprises and are able to give full play to their strong research capability. Supported by the national enterprise technology centre and the post-doctoral working station, the Company has established a comprehensive intellectual property system and put more and more efforts in technical innovation and scientific research and development to develop new products with high technology contents and high added value as well as proprietary technologies. The Company has scientific research institutions such as the national enterprise technology centre, the post-doctoral scientific research station, and the nationally recognised CNAS Pulp and Paper Testing Center. The Company has obtained 232 national patents, including 19 patents for invention and 7 products selected as national new products. The Company has obtained 14 science and technology progress awards above the provincial level and undertaken five national science and technology projects and 62 provincial technological innovation projects. The Company has pioneered to obtain the ISO9001 quality certification, ISO14001 environmental protection certification and FSC-COC certification among its industry peers.

6. Team advantages

The key management members and the core personnel of the Company remain stable. In the business development of the Company, an internal corporate culture developed by the stable core staff team favourable to the growth of the Company consolidates the management experience specific to the industry, thus resulting in a team advantage blended with management and culture. Meanwhile, the Company has attracted experienced professionals with production, sales, financial, legal, financial management backgrounds through its advanced management philosophy and ample room for development. The high quality and professional team secures the sustainable development of the Company with a solid supply of talents.

7. Advantages in environmental governance capacity

In recent years, the Company and its subsidiaries have invested more than RMB8 billion to construct the pollution treatment facilities including the alkali recovery system, middle water treatment system, middle water reuse system, white water recovery system and black liquor comprehensive utilisation system. The environmental indicators of the Company rank high in the country and in the world. At present, the Company adopts the world’s most advanced “ultrafiltration membrane+reverse osmosis membrane” technology to complete the reclaimed water recycling membrane treatment project. The reclaimed water recycle rate reaches more than 75%. The reclaimed water quality meets drinking water standards, which can save fresh water every day 170,000 cubic metres.


IV Discussion and Analysis of Operations

I. Overview

During the reporting period, the paper making industry was greatly affected by the epidemic. The overseas epidemic outbreak suppressed the overseas demand for paper products. In addition, the domestic demand for paper had been sluggish since the epidemic. The downward pressure on the prices of major paper types had increased. There was a significant decline in the economic benefit of the paper making industry as a whole.

Wuhan Chenming and Huanggang Chenming, subsidiaries of the Company, were at the centre of the epidemic. Their suspension of production to fight against the epidemic affected the overall performance of the Company to a certain extent. However, other major production bases of the Company not only did their best to prevent and control the epidemic, but also achieved production at close to full capacity, gradually demonstrating the benefits of pulp and paper integration. Various operating indicators improved during the first half of the year as compared to the corresponding period of last year, including completing pulp production of 1.66 million tonnes and machine-made paper production of 2.75 million tonnes, representing a year-on-year increase of 59.70% and 27.90% respectively; achieving revenue of RMB13.6 billion, representing a year-on-year increase of 1.88%; and achieving net profit of RMB516 million, steadily increasing from the corresponding period of last year.

In the second half of the year, with the epidemic further under control, the economy is expected to gradually regain its vitality, market demand will gradually rebound, and the prices of the Company’s major paper types will steadily rise. Coupled with the gradual recovery of wood pulp market prices, the core advantage of pulp and paper balance of the Company will be further brought into play. The performance of the Company will significantly improve with the recovery of the national economy and market conditions.

II. Analysis of principal operations

Please see “I. Overview” under “Discussion and Analysis of Operations” for relevant information.

Year-on-year changes in major financial information

Unit: RMB

ItemDuring the

reporting period

During the corresponding period

of the prior year

Increase/decrease

year on year Reason for the change

Revenue 13,599,805,765.86 13,348,648,113.70 1.88%Operating costs 10,185,300,033.31 9,754,097,799.82 4.42%Selling and distribution expenses 652,742,420.35 590,584,957.47 10.52% Transportation expenses increased year on year

during the reporting period.Administrative expenses 491,987,245.33 562,417,399.25 -12.52% Depreciation expenses decreased year on year

during the reporting period.Research and development expense 548,557,146.89 431,483,716.06 27.13% The Company increased efforts in research and

development during the reporting period.Finance expenses 1,346,217,562.46 1,516,848,723.80 -11.25% Interest expenses of the Company decreased

year on year during the reporting period.Net cash flows from operating

activities2,327,033,784.68 2,699,770,891.69 -13.81% The net recovery of the Leasing Company

decreased year on year during the reporting period.

Net cash flows from investing activities

94,823,534.32 -2,094,526,965.30 104.53% The payment for the equity interest in Nanyue Bank was made during the corresponding period of last year.

Net cash flows from financing activities

-3,094,384,197.10 -780,976,710.04 -296.22% The Company reduced its debts during the reporting period.

Significant change in structure or source of profit of the Company during the reporting period


There was no significant change in structure or source of profit of the Company during the reporting period.



II. Analysis of principal operations (Cont’d)

Components of revenue

Unit: RMB

During the reporting periodDuring the corresponding

period of the prior year Increase/decreaseAmount % of revenue Amount % of revenue

Total revenue 13,599,805,765.86 100% 13,348,648,113.70 100% 1.88%

By industry

Machine-made paper 11,558,358,972.70 84.99% 11,561,215,578.29 86.61% -0.02%Electricity and steam 77,835,853.84 0.57% 90,744,501.22 0.68% -14.23%Chemical products 65,927,709.45 0.48% 56,149,320.48 0.42% 17.41%Construction materials 178,629,808.17 1.31% 126,059,123.60 0.94% 41.70%Hotel 7,284,272.63 0.05% 13,188,285.58 0.10% -44.77%Financial leasing 523,141,507.84 3.85% 947,166,321.20 7.10% -44.77%Others 1,188,627,641.23 8.74% 554,124,983.33 4.15% 114.51%

By product

Duplex press paper 3,132,410,469.07 23.03% 3,213,175,197.38 24.07% -2.51%Coated paper 1,791,146,258.55 13.17% 1,556,419,430.61 11.66% 15.08%White paper board 3,188,834,251.43 23.45% 3,712,516,190.44 27.81% -14.11%Electrostatic paper 1,869,067,585.37 13.74% 1,121,377,047.63 8.40% 66.68%Anti-sticking raw paper 480,463,979.97 3.53% 619,876,429.25 4.64% -22.49%Other machine-made paper 1,096,436,428.31 8.06% 1,337,851,282.98 10.02% -18.04%Electricity and steam 77,835,853.84 0.57% 90,744,501.22 0.68% -14.23%Chemical products 65,927,709.45 0.48% 56,149,320.48 0.42% 17.41%Construction materials 178,629,808.17 1.31% 126,059,123.60 0.94% 41.70%Hotel 7,284,272.63 0.05% 13,188,285.58 0.10% -44.77%Financial leasing 523,141,507.84 3.85% 947,166,321.20 7.10% -44.77%Others 1,188,627,641.23 8.74% 554,124,983.33 4.15% 114.51%

By geographical segment

Mainland China 11,957,574,405.64 87.92% 11,249,807,122.53 84.28% 6.29%Other countries and regions 1,642,231,360.22 12.08% 2,098,840,991.17 15.72% -21.76%

Industries, products or regions accounting for over 10% of revenue or operating profit of the Company




II. Analysis of principal operations (Cont’d)

Components of revenue (Cont’d)

Unit: RMB

Revenue Operating costsGross profit

margin

Increase/decrease of revenue as

compared to the corresponding


Increase/decrease of

operating costs as

compared to the corresponding


Increase/decrease of gross profit

margin as compared to the

corresponding period of the

prior year

By industry

Machine-made paper 11,558,358,972.70 8,953,332,081.47 22.54% -0.02% -1.68% 1.30%Financial leasing 523,141,507.84 54,916,315.24 89.50% -44.77% -46.77% 0.40%

By product

Duplex press paper 3,132,410,469.07 2,399,209,094.08 23.41% -2.51% -2.55% 0.03%Coated paper 1,791,146,258.55 1,373,594,825.68 23.31% 15.08% 10.96% 2.85%White paper board 3,188,834,251.43 2,466,957,387.87 22.64% -14.11% -20.68% 6.41%Electrostatic paper 1,869,067,585.37 1,405,945,384.28 24.78% 66.68% 71.00% -1.90%Anti-sticking raw paper 480,463,979.97 346,351,242.25 27.91% -22.49% -20.97% -1.39%Financial leasing 523,141,507.84 54,916,315.24 89.50% -44.77% -46.77% 0.40%

By geographical segment

Mainland China 11,957,574,405.64 8,698,744,557.97 27.25% 6.29% 9.25% -1.94%Other countries and regions 1,642,231,360.22 1,486,555,475.34 9.48% -21.76% -15.52% -7.22%

Explanation on why the related data varied by more than 30%:

Affected by the overseas novel coronavirus epidemic, the Company’s machine-made paper sale in other countries and regions decreased, and revenue decreased during the reporting period.

III. Analysis of non-principal operations




IV. Assets and liabilities

1. Material changes of asset items

Unit: RMB

As at the end of the reporting period As at the end of the prior year

Item Amount

As a percentage of

total assets Amount

As a percentage of

total assetsPercentage

change Description

Accounts receivable financing

1,418,702,732.26 1.43% 442,915,861.70 0.45% 0.98% Number of bills held at the end of the reporting period increased from the beginning of the year.

Other receivables 3,129,061,804.47 3.16% 2,216,654,598.66 2.26% 0.90% F ina l paymen t o f r e l oca t i on compensation of Wuhan Chenming was not received by the end of the reporting period.

Fixed assetsConstruction in progress

38,215,983,514.51598,051,166.87

38.59%0.60%

34,439,935,032.695,476,122,928.95

35.16%5.59%

3.43%-4.99%

The assets of the pulping project and biomass power generation project of Huanggang Chenming were transferred.

Bills payable 2,747,606,761.17 2.77% 1,515,048,206.00 1.55% 1.22% During the reporting period, the Company increased its payment for goods with bills.



IV. Assets and liabilities (Cont’d)

2. Assets and liabilities measured at fair value


Unit: RMB

Item Opening balance

Profit or loss from change in fair value

during the period

Cumulative fair value change

charged to equity

Impairment provided

during the period

Purchases during the

periodDisposal during

the periodOther

changes Closing balance

Financial assetsOther non-current financial assets 147,445,653.55 147,445,653.55Subtotal of financial assets 147,445,653.55 147,445,653.55Consumable biological assets 1,541,004,633.42 -9,246,743.86 31,725,785.63 6,729,888.54 1,556,753,786.65Total 1,688,450,286.97 -9,246,743.86 31,725,785.63 6,729,888.54 1,704,199,440.20

Whether there were any material changes on the measurement attributes of major assets of the Company during the reporting period

□ Yes √ No

3. Restriction on asset rights as at the end of the reporting period

Unit: RMB

ItemCarrying amount as at the end of the period Reasons for such restriction

Monetary funds 18,718,827,955.87 As deposits for bank acceptance bills, letters of credit and bank borrowings, and deposit reserves

Bills receivable 624,106,580.39 As collateral for short-term borrowings, letters of guarantee and letters of credit

Fixed assets 9,433,004,439.14 As collateral for bank borrowings and long-term payablesIntangible assets 855,039,400.00 As collateral for bank borrowings and long-term payablesInvestment property 4,581,606,847.89 As collateral for bank borrowingsTotal 34,212,585,223.29 –

V. Analysis of Investments

1. Overview


Investments during the reporting period (RMB)

Investments during the corresponding period of

the prior year (RMB) Change

42,000,000.00 1,890,000,000.00 -97.78%



V. Analysis of Investments (Cont’d)

2. Material equity investments during the reporting period


3. Material non-equity investments during the reporting period


4. Financial assets measured at fair value


Unit: RMB

Category of assetInitial

investment cost

Profit or loss from change in fair value

during the period

Cumulative fair value

change charged to equity

Purchase amount during

the reporting period

Amount sold during


Cumulative investment

income Closing balance Source of fund

Other non-current financial assets 147,445,653.55 147,445,653.55 Self-owned fundsTotal 147,445,653.55 147,445,653.55 –

5. Financial asset investment

(1) Security investments□ Applicable √ Not applicable

The Company did not have any security investments during the reporting period.

(2) Derivatives investments□ Applicable √ Not applicable

The Company did not have any derivative investments during the reporting period.

VI. Disposal of material assets and equity interest

1. Disposal of material assets


The Company did not dispose of any material asset during the reporting period.

2. Disposal of material equity interest




VII. Analysis of major subsidiaries and investees


Major subsidiary and investees accounting for over 10% of the net profit of the Company

Unit: RMB

Name of companyType of company Principal activities

Registered capital Total assets Net assets Revenue Operating profit Net profit

Zhanjiang Chenming Pulp & Paper Co., Ltd.

Subsidiary Production and sale of pulp, duplex press paper, and electrostatic paper

5,550,000,000 23,173,377,185.88 8,694,068,953.57 5,491,037,594.32 247,556,739.81 238,666,765.98

Shandong Chenming Group Finance Co., Ltd.

Subsidiary Financial service 5,000,000,000 10,896,995,232.49 5,497,129,464.35 196,779,902.79 147,287,423.74 109,679,944.36

Shanghai Chenming Industrial Co., Ltd.

Subsidiary Business consulting, property management and material sales

3,000,000,000 5,659,980,259.75 2,510,297,785.53 35,672,030.09 -130,618,251.69 -127,912,577.85

Guangdong Nanyue Bank Co., Ltd. Associate Financial service 7,877,476,000 225,927,232,071.20 18,047,154,466.30 2,372,383,445.87 961,364,313.81 746,448,582.48

Acquisition and disposal of subsidiaries during the reporting period


Name of company

Methods to acquire and dispose of subsidiaries during the reporting period

Impact on overall production and operation and results

Shouguang Chenming Industrial Logistics Co., Ltd. Disposal Net profit increase by RMB3.97 millionQingdao Chenming International Logistics Co., Ltd. Disposal Net profit increase by RMB360,000Chenming (Overseas) Co., Ltd. Establishment NilChenming (Singapore) Co., Ltd. Establishment Nil

VIII. Structured entities controlled by the Company


IX. Estimate of the operating results from January to September 2020

Warning of cumulative net profit for the period between the beginning of the year to the end of the next reporting period being projected to be at a loss or expected to have material changes as compared to the corresponding period of prior year and its explanation




X. Risk exposures of the Company and the measures to be taken

1. Macroeconomic risk

Paper making industry is a basic raw materials industry, with particularly significant cyclicality, and its prosperity is positively correlated with macroeconomic trends. Since the first half of the year, the epidemic has affected the growth of the national economy, and weak consumer demand in the market has directly affected the profitability of the Company.

Hence, following the principles of scientific development and quality and efficiency enhancement, the Company will comprehensively improve its industrial structure and regional layout through incorporation of smart technology into its industrial activities. The Company will emphasise on the development of leading businesses including pulp production and paper making, so as to construct an efficient industrial system with synergies, making use of cost advantages to steadily address to the crises.

2. Market fluctuation risk

With the rapid growth of the national economy, economic globalisation and China’s accession to the WTO, China’s paper making industry has been facing increasingly fierce competition. Leveraging on the strength and capital accumulated over the years, domestic enterprises have further expanded their size and improved their technological levels and product quality. Well-known paper making enterprises overseas have also directly set up production bases in China through sole proprietorship or joint ventures so as to participate in the domestic market competition by virtue of their advantages in size and technology. Besides, the Sino-US trade war in recent years has also had effect on the exports of the Company to a certain extent.

Hence, the Company will strive to enhance the quality of paper products and achieve the target of establishing a layout for high-end paper industry so as to increase the proportion of high-end paper. In recent years, the Company has been expanding its business size while optimising its product mix and has set up a few production lines for high-end paper. A diversified and high-end product mix enables the Company to spread market risk and strengthen the resistance towards market volatility. Besides, as high-end products have better profit margins, the Company can increase the proportion of high-end products through consistent improvement in product mix, thereby enhancing its profitability and comprehensive competitiveness.

3. Risk of price fluctuation of raw materials

Wood pulp is a major raw material in the Company. The market price of wood pulp fluctuates significantly. The market price fluctuation of raw material has significantly affected the production costs of the Company. In addition to intensified market competition resulting from surging capacity in the industry in recent years, the increases in prices of a number of paper products were not in line with the increases in prices of raw materials. The market price fluctuation of raw materials will have an impact on the performance of the Company.

For this purpose, the Company adheres to the development path of “forestry, pulp and paper integration”. With the operation commencement of the Huanggang Chenming and Shouguang Meilun chemical wood pulp projects, the Company currently has three pulp mills in Zhanjiang, Huanggang and Shouguang, the largest wood pulp production capacity in China. With production capacity of more than 4.3 million tonnes, it is the first integrated forestry, pulp and paper enterprise in China with self-sufficiency in wood pulp and perfect complementary pulp and paper production capacity. In the future, the gross profit rate of its products will increase significantly, and its anti-risk capability will also be effectively enhanced.



X. Risk exposures of the Company and the measures to be taken (Cont’d)

4. Risk of change in environmental protection policies

China has been raising the standards for environmental protection in recent years. More stringent environmental protection policies have been implemented in the paper making industry with successive implementation of environmental inspections and licensing system for pollutant discharge. A multi-pronged approach has been adopted to promote industrial restructuring, and the paper making industry has entered into an important transitional period of development. A higher emission standard is bound to increase the environmental protection costs in the industry and a high entry standard may result in the slowdown of scale expansion.

In recent years, the Company and its subsidiaries have invested more than RMB8 billion to construct the pollution treatment facilities including the alkali recovery system, middle water treatment system, middle water reuse system, white water recovery system and black liquor comprehensive utilisation system. The environmental indicators of the Company rank high in the country and in the world. At present, the Company adopts the world’s most advanced “ultrafiltration membrane+reverse osmosis membrane” technology to complete the reclaimed water recycling membrane treatment project. The reclaimed water recycle rate reaches more than 75%. The reclaimed water quality meets drinking water standards, which can save fresh water every day 170,000 cubic metres.

5. Risk on financial leasing business

The Company may suffer from loss if the lessees of its financial leasing business cannot make full rental payment on time due to any reason. Although the risk of such rental being unrecoverable is minimal, the Company will also make bad debt provision as required under its accounting policy. If such amounts cannot be recovered on time, the Company may be exposed to risk of bad debts.

The stringent risk management measures of Chenming Leasing provide comprehensive risk prevention and control for its projects. Besides, its clients are mostly state-owned enterprises and government platforms, with strong risk resistance and low risk of default. In addition, the financial leasing company has been continuously reducing the scale of the financial leasing business in recent years, adhering to the policy of “continuous reduction”.


V Material Matters

I. Annual general meeting and extraordinary general meeting convened during the reporting period

1. General meetings during the reporting period

Meeting Type of meeting

Attendance rate of

investors Convening date Disclosure date Disclosure index

2020 first extraordinary general meeting Extraordinary general meeting 3.41% 9 March 2020 10 March 2020 http://www.cninfo.com.cn2020 second extraordinary general meeting Extraordinary general meeting 9.03% 15 May 2020 16 May 2020 http://www.cninfo.com.cn2020 first class meeting for holders of

domestic-listed sharesClass meeting 7.74% 15 May 2020 16 May 2020 http://www.cninfo.com.cn

2020 first class meeting for holders of overseas listed shares

Class meeting 14.94% 15 May 2020 16 May 2020 http://www.cninfo.com.cn

2019 annual general meeting Annual general meeting 29.39% 19 June 2020 20 June 2020 http://www.cninfo.com.cn

2. Extraordinary general meeting requested by holders of preference shares with voting rights restored


II. Profit distribution and conversion of capital reserves into share capital during the reporting period


The Company does not propose distribution of cash dividends and bonus shares, and increase of share capital from reserves for the interim period.

III. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers, shareholders, related parties, bidders and the Company during the reporting period or prior periods but subsisting to the end of the reporting period


During the reporting period, there was no undertaking made by parties involved in undertakings including the Company’s beneficial controllers, shareholders, related parties, bidders and the Company during the reporting period or prior periods but subsisting to the end of the reporting period.

IV. Engagement or dismissal of accounting firms

Has the interim financial report been audited?

□ Yes √ No

The interim financial report is unaudited.

V. Opinions of the Board and the Supervisory Committee regarding the “modified auditor’s report” for the reporting period issued by the accountants


VI. Opinions of the Board regarding the “modified auditor’s report” for the prior year



V Material Matters

VII. Matters related to bankruptcy and reorganisation


There was no matter related to bankruptcy and reorganisation during the reporting period.

VIII. Litigation

Material litigation and arbitration


The Company was not involved in any material litigation and arbitration during the reporting period.

Other litigations

□ Applicable √ Not applicable/

IX. Media questioning


Issue questioned by the media Disclosure date Disclosure index

Some media reported that the People’s Procuratorate of Nanchang City prosecuted Jiangxi Chenming Paper Co., Ltd. and 7 persons including Guo XX and Li XX for environmental pollution crimes. 19 June 2020 http://www.cninfo.com.cn

X. Punishment and rectification


Name Type ReasonType of investigation punishment Conclusion (if any) Disclosure date Disclosure index

Jiangxi Chenming Paper Co., Ltd.

Subsidiary Excessive emissions of suspended matter

Administrative penalty by the environmental protection department

In November 2019, dur ing a dai ly environmental protection inspection of Jiangxi Chenming, Nanchang Ecological Environment Bureau found that the suspended matter in the wastewater discharged from its wastewater treatment outlet was 55 mg/L, which exceeded the standard by 0.83 time. Therefore, Jiangxi Chenming was fined RMB401,000. As of the date of the report, the above violation has been corrected and the fine has been paid.

Not applicable Not applicable


Subsidiary Excessive discharge of water pollutants

Administrative penalty by the environmental protection department

During an environmental protection inspection of Zhanjiang Chenming, Zhanjiang Ecological Environment Bureau found that the rainwater discharge outlet of the rainwater channel in the Zhanjiang Chenming factory area had excessive discharge of water pollutants. Therefore, Zhanjiang Chenming was fined RMB1 million. As of the date of the report, the above violation has been corrected and the fine has been paid.

Not applicable Not applicable


V Material Matters

X. Punishment and rectification (Cont’d)

Rectification


Jiangxi Chenming adjusted its water treatment technique, refined dosing operation, increased sludge press quality, and established, among others, monitoring response mechanism for water quantity and water standard at the middle water section designed to respond to changes in BTMP ingredient ratio and load. As a result, Jiangxi Chenming proved qualified on all indicators during spontaneous sampling inspections conducted by Nanchang Ecological Environment Bureau and the environmental monitor station as well as a scheduled sampling inspection conducted by a third party. Based on such results, Nanchang Ecological Environment Bureau determined that the rectification for out-of-limit waste water (SS standard) of Jiangxi Chenming had been completed.

After Zhanjiang Chenming discovered that water pollutants flowed outside its factory, it immediately suspended the cleaning of the reservoir and shut down the production system of the section where the green liquid tank was located. Meanwhile, emergency measures were initiated to prevent the continuous outflow of water pollutants within a very short time. The water pollutants trapped in the factory were recycled to the sewage treatment system and the rainwater gutter was thoroughly cleaned. After the implementation of the above measures, when the relevant department conducted a-sampling inspection again in the water area connected to the rainwater discharge outlet the next day, the relevant indicators met the national standards, and the rectification measures achieved good results.

XI. Credibility of the Company, its controlling shareholders and beneficial controllers


XII. Implementation of the equity incentive plan, employee shareholding plan or other employee incentive measure of the Company


1. On 30 March 2020, the ninth extraordinary meeting of the ninth session of the Board of the Company considered and approved the Resolution in Relation to the 2020 Restricted Share Incentive Scheme of Shandong Chenming Paper Holdings Limited (Draft) and Its Summary, the Resolution in Relation to the Assessment Management Measures for the Implementation of the 2020 Restricted Share Incentive Scheme of Shandong Chenming Paper Holdings Limited, and the Resolution in Relation to the Authorisation Granted by the General Meeting to the Board to Deal with Matters Relating to the Share Incentive Scheme of the Company. On the same date, the fourth extraordinary meeting of the ninth session of the Supervisory Committee of the Company considered and approved the above resolutions and verified the list of proposed participants of the incentive scheme. Independent Directors of the Company issued independent opinions on the incentive scheme.

2. On 3 April 2020, the Company announced the list of participants through the Company’s internal website for a period from 3 April 2020 to 12 April 2020. During the period, the Supervisory Committee of the Company and relevant departments did not receive any objection against the proposed participants. The Supervisory Committee verified the list of participants under the grant of the incentive scheme.

For details, please refer to the Explanation on the Status of Announcement and Review Opinions of the Supervisory Committee Regarding the List of Participants under 2020 Restricted A Share Incentive Scheme disclosed by the Company on CNINFO (www.cninfo.com.cn) on 8 May 2020.


V Material Matters

XII. Implementation of the equity incentive plan, employee shareholding plan or other employee incentive measure of the Company (Cont’d)

3. On 15 May 2020, the Resolution in Relation to the 2020 Restricted Share Incentive Scheme of Shandong Chenming Paper Holdings Limited (Draft) and Its Summary, the Resolution in Relation to the Assessment Management Measures for the Implementation of the 2020 Restricted Share Incentive Scheme of Shandong Chenming Paper Holdings Limited, and the Resolution in Relation to the Authorisation Granted by the General Meeting to the Board to Deal with Matters Relating to the Share Incentive Scheme of the Company were considered and approved at the 2020 second extraordinary general meeting, the 2020 first class meeting for holders of domestic-listed shares and the 2020 first class meeting for holders of overseas-listed shares of the Company. On 16 May 2020, the Company disclosed the Self-Examination Report for the Trading of Shares of the Company by Insiders and Participants of the 2020 Restricted A Share Incentive Scheme.

4. On 29 May 2020, the Resolution on the Matters Relating to Adjustments to the 2020 Restricted A Share Incentive Scheme of the Company and the Resolution in Relation to the Grant of Restricted Shares to the Participants were considered and approved at the tenth extraordinary meeting of ninth session of the Board and the fifth extraordinary meeting of the ninth session of the Supervisory Committee of the Company. The independent Directors of the Company issued independent opinions thereon, agreed that the Board shall make adjustments to the list of proposed participants and the number of shares to be granted, and considered that the participants were legally and validly qualified and that the grant date determined was in compliance with relevant requirements.

5. On 28 June 2020, Grant Thornton issued a Capital Verification Report (Zhi Tong Yan Zi (2020) No. 371ZC00199), in which they verified the Company’s subscription contribution status for the share incentive scheme as of 23 June 2020, and considered that:

The original registered capital of the Company was RMB2,904,608,200.00, and the paid-up capital (share capital) was RMB2,904,608,200.00. According to the resolutions passed at the Company’s 2020 second extraordinary general meeting, the 2020 first class meeting for holders of domestic-listed shares and the 2020 first class meeting for holders of overseas-listed shares, the provisions of the amended Articles of Association, as well as the approval Shou Guo Zi [2020] No.7 issued by the State-owned Assets Supervision and Administration Bureau of Shouguang City, the Company applied to increase its registered capital by RMB79,600,000.00 to RMB2,984,208,200.00. After our verification, as of 23 June 2020, the Company received from shareholders a subscription amount of RMB225,864,104.00 (RMB TWO HUNDRED TWENTY FIVE MILLION EIGHT HUNDRED SIXTY-FOUR THOUSAND ONE HUNDRED AND FOUR, net of issue expenses of RMB995,896.00), including the share capital of RMB79,600,000.00 and the capital reserve of RMB146,264,104.00

As at 23 June 2020, the registered capital after such change was RMB2,984,208,200.00, and the accumulated paid-up capital (share capital) was RMB2,984,208,200.00.


V Material Matters

XIII. Significant related party transactions

1. Related party transactions associated with day-to-day operation


Related party

Related party

relationship

Types of the

related party

transactions

Subject

matter of the

related party

transactions

Pricing

basis of the

related party

transaction

Related party

transaction

price

Amount of

related party

transactions

(RMB’0,000)

Percentage

as the amount

of similar

transactions

Amount of

transactions

approved

(RMB’0,000)

Whether

exceeding

approved cap

Settlement of

related party

transactions

Market price

of available

similar

transaction

Disclosure

date Disclosure index

Jiangxi Jiuyu Energy

Co., Ltd.

Director and senior

management of the

Company served as

the director and senior

management of the

company during the

past twelve months

Procurement Natural gas,

heavy oil, etc.

Market price Market price 6,860.61 0.67% 60,000 No Bank acceptance

and telegraphic

transfer

Not applicable 29 March

2020

http://www.cninfo.com.cn

Total – – 6,860.61 – 60,000 – – – –

Particulars on refund of bulk sale Not applicable

2. Related party transaction in connection with purchase or sale of assets or equity interest


There was no related party transaction of the Company in connection with purchase or sale of assets or equity interest during the reporting period.

3. Related party transaction connected to joint external investment


There was no related party transaction of the Company connected to joint external investment during the reporting period.

4. Related creditors’ rights and debts transactions


Was there any non-operating related creditors’ rights and debts transaction?

√ Yes □ No

Debts payable to any related party:

Related partyRelationship with the Company Reason

Opening balance

(RMB’0,000)

Amount increased during the

current period (RMB’0,000)

Amount recovered during the

current period (RMB’0,000) Interest rate

Interest for the current period

(RMB’0,000)

Closing balance

(RMB’0,000)

CHENMING HOLDINGS COMPANY LIMITED The controlling shareholder of the Company

Financial support 70,844.09 82,222.97 153,067.06 7% 537.06 0

Effect of related debts on the operating results and financial position of the Company

Financial support is provided by Chenming Holdings without requiring any pledge or guarantee, which is a testament to its support and confidence in the future development of the Company, and helps the Company promote project construction and satisfy its needs for working capital.


V Material Matters

XIII. Significant related party transactions (Cont’d)

5. Other significant related party transactions


There was no other significant related party transaction of the Company during the reporting period.

XIV. Appropriation of funds of the Company by the controlling shareholder and its related parties for non-operating purposes


There was no appropriation of funds of the Company by the controlling shareholder and its related parties for non-operating purposes during the reporting period.

XV. Material contracts and implementation

1. Custody, contracting and leasing

(1) Custody□ Applicable √ Not applicable

There was no custody of the Company during the reporting period.

(2) Contracting□ Applicable √ Not applicable

There was no contracting of the Company during the reporting period.

(3) Leasing□ Applicable √ Not applicable

There was no leasing of the Company during the reporting period.

2. Significant guarantees


(1) GuaranteesDuring the reporting period, the Company provided guarantee to subsidiaries and the guarantee amount incurred was RMB5,225.2927 million. The subsidiaries provided guarantee to their subsidiaries and the guarantee amount incurred was RMB94.5389 million.

As at 30 June 2020, the balance of the external guarantee provided by the Company (including the guarantee to its subsidiaries by the Company and the guarantee provided to subsidiaries by subsidiaries) amounted to RMB13,357.9020 million, representing 53.63% of the equity attributable to shareholders of the Company as at June 2020.

The Company did not provide any guarantee to external parties (excluding the guarantee provided to its subsidiaries and share participating companies and the guarantee provided to subsidiaries by subsidiaries) and did not provide any guarantee against the rules and regulations.


V Material Matters

XV. Material contracts and implementation (Cont’d)

2. Significant guarantees (Cont’d)

(1) Guarantees (Cont’d)Unit: RMB’0,000

External guarantees of the Company and its subsidiaries (excluding guarantees to subsidiaries)

Name of obligee

Date of the related Announcement disclosing the guarantee amount

Amount of guarantee Guarantee date

Guarantee provided Type of guarantee Term

Fulfilled or not

Guarantee to related

parties or not

Weifang Sime Darby West Port Co., Ltd

24 July 2017 17,500 20 December 2017 13,500 General guarantee 10 years No No

Total external guarantees approved during the reporting period (A1)

0 Total actual external guarantees during the reporting period (A2)

0

Total external guarantees approved at the end of the reporting period (A3)

17,500 Balance of total actual guarantees at the end of the reporting period (A4)

13,500

Guarantees between the Company and its subsidiaries

Name of obligee




Fulfilled or not


parties or not


14 June 2018 200,000 31 October 2018 510,451.50 General guarantee 3 years No No


30 March 2019 1,088,000 General guarantee 5 years No No


27 March 2020 200,000 General guarantee 5 years No No

Shandong Chenming Group Finance Co., Ltd.


Shandong Chenming Paper Sales Co., Ltd.

30 March 2019 600,000 31 March 2020 162,372.86 General guarantee 5 years No No

Shandong Chenming Financial Leasing Co., Ltd.

26 March 2015 100,000 21 September 2017 2,500.00 General guarantee 7 years No No

Shandong Chenming Financial Leasing Co., Ltd.


Shanghai Chenming Financial Leasing Co., Ltd.

14 February 2018 50,000 General guarantee 3 years No No

Qingdao Chenming Nonghai Financial Leasing Co., Ltd.


Guangzhou Chenming Financial Leasing Co., Ltd.


Shandong Chenming Commercial Factoring Co., Ltd.


Huanggang Chenming Pulp & Paper Co., Ltd.

26 March 2015 400,000 5 January 2017 112,777.75 General guarantee 7 years No No



Jiangxi Chenming Paper Co., Ltd. 14 June 2018 50,000 General guarantee 3 years No NoJiangxi Chenming Paper Co., Ltd. 30 March 2019 350,000 22 November 2019 161,305.00 General guarantee 5 years No NoShouguang Meilun Paper Co., Ltd. 16 December 2010 600,000 9 December 2019 65,122.73 General guarantee 10 years No No


V Material Matters

Guarantees between the Company and its subsidiaries

Name of obligee




Fulfilled or not


parties or not

Shouguang Meilun Paper Co., Ltd. 30 March 2019 100,000 General guarantee 5 years No NoShouguang Meilun Paper Co., Ltd. 27 March 2020 400,000 General guarantee 5 years No NoWuhan Chenming Hanyang Paper

Holdings Co., Ltd.18 October 2019 100,000 General guarantee 3 years No No

Chenming (HK) Limited 14 June 2018 250,000 30 November 2018 67,934.88 General guarantee 3 years No NoChenming (HK) Limited 30 March 2019 500,000 General guarantee 5 years No NoShouguang Chenming Import and

Export Trade Co., Ltd.30 March 2019 50,000 General guarantee 5 years No No

Jilin Chenming Paper Co., Ltd. 30 March 2019 150,000 6 March 2020 11,805.35 General guarantee 5 years No NoZhanjiang Chenming Arboriculture

Development Co., Ltd.30 March 2019 10,000 General guarantee 5 years No No

Nanchang Chenming Arboriculture Development Co., Ltd.

15 August 2017 10,000 General guarantee 3 years No No

Nanchang Chenming Arboriculture Development Co., Ltd.


Shandong Chenming Panels Co., Ltd.

14 June 2018 3,000 General guarantee 3 years No No

Shanghai Chenming Pulp & Paper Sales Co., Ltd.

30 March 2019 300,000 27 December 2019 3,500.00 General guarantee 5 years No No

Shanghai Chenming Industry Co., Ltd.

11 October 2018 400,000 General guarantee 3 years No No

Shanghai Hongtai Real Estate Co., Ltd.


Shanghai Hongtai Property Management Co., Ltd.


Chenming (Overseas) Co., Ltd. 27 March 2020 100,000 General guarantee 5 years No NoChenming (Singapore) Co., Ltd. 27 March 2020 100,000 General guarantee 5 years No NoTotal amount of guarantee provided for subsidiaries

approved during the reporting period (B1)960,000 Total amount of guarantee provided for subsidiaries during

the reporting period (B2)522,829.27

Total amount of guarantee provided for subsidiaries approved as at the end of the reporting period (B3)

7,921,000 Total balance of guarantee provided for subsidiaries as at the end of the reporting period (B4)

1,097,770.08



(1) Guarantees (Cont’d)

Unit: RMB’0,000


V Material Matters

Guarantees between subsidiaries

Name of obligee




Fulfilled or not


parties or not

Chenming (HK) Limited 30 March 2019 200,000 2 April 2019 199,597.52 General guarantee 5 years No NoChenming (HK) Limited 30 March 2019 100,000 19 March 2020 24,922.60 General guarantee 5 years No NoTotal amount of guarantee provided for subsidiaries

approved during the reporting period (C1)0 Total amount of guarantee provided for subsidiaries during

the reporting period (C2)9,453.89

Total amount of guarantee provided for subsidiaries approved as at the end of the reporting period (C3)

300,000 Total balance of guarantee provided for subsidiaries as at the end of the reporting period (C4)

224,520.12

Total amount of guarantee provided (i.e. sum of the above three guarantee amount)Total amount of guarantee approved during the reporting

period (A1+B1+C1)960,000 Total amount of guarantee during the reporting period

(A2+B2+C2)532,283.16

Total amount of guarantee approved as at the end of the reporting period (A3+B3+C3)

8,238,500 Total balance of guarantee as at the end of the reporting period (A4+B4+C4)

1,335,790.20

The percentage of total amount of guarantee provided (i.e. A4+B4+C4) to the net assets of the Company 53.63%

Of which:Balance of guarantee provided for shareholders, beneficial controllers and its related parties (D) 0Balance of guarantee directly or indirectly provided for obligors with gearing ratio over 70% (E) 471,827.86Total amount of guarantee provided in excess of 50% of net assets (F) 90,408.56Sum of the above three amount of guarantee (D+E+F) 562,236.43

(2) External guarantees against the rules and regulations□ Applicable √ Not applicable

There was no external guarantee provided by the Company which was against the rules and regulations during the reporting period.

3. Entrusted wealth management□ Applicable √ Not applicable

The Company did not have any entrusted wealth management during the reporting period.

4. Other material contracts□ Applicable √ Not applicable

The Company did not have any other material contract during the reporting period.



(1) Guarantees (Cont’d)

Unit: RMB’0,000


V Material Matters

XVI. Fulfilment of Social Responsibility

1. Major environmental protection matters

Are the Company and its subsidiaries classified as key pollutant discharging unit as specified by environmental protection authority?

Yes

Name of company or subsidiary

Name of major pollutants and specific pollutants Way of emission

Number of emission

outletsDistribution of emission outlets

Emission concentration

Pollutant emission standards

implementedTotal

emissionsApproved total

emissionsExcessive emissions

Shandong Chenming Paper Holdings Limited

COD Organised emission 2 Within Chenming Industrial Park

183.4mg/m3 300mg/L 1767t 6510.74t No

Ammonia nitrogen Organised emission 2 Within Chenming Industrial Park

6.9mg/m3 30mg/L 62.219t 650.7t No

Sulphur dioxide Organised emission 2 Within Chenming Industrial Park

Power plant: 3.795mg/m3

Power plant: 35mg/m3

Power plant: 6.233t

Power plant: 160.32t

No

Nitrogen oxide Organised emission 2 Within Chenming Industrial Park


Power plant: 50 mg/m3

Power plant: 53.14t


No

Smoke Organised emission 2 Within Chenming Industrial Park


Power plant: 5mg/m3


Power plant: 23.39t

No

Shouguang Meilun Paper Co., Ltd. Sulphur dioxide Organised emission 4 Within Chenming Industrial Park


Alkali recovery: 2.59mg/m3

Lime kiln: 4.63mg/m3


Alkali recovery: 50mg/m3Lime kiln: 50mg/m3


Alkali recovery: 10.712t

Lime kiln:3.23t

Power plant: 303.6t


No

Nitrogen oxide Organised emission 4 Within Chenming Industrial Park





Alkali recovery: 100mg/m3Lime kiln:

100 mg/m3



Lime kiln: 6.53t



No

Smoke Organised emission 4 Within Chenming Industrial Park




Power plant: 5mg/m3

Alkali recovery: 10mg/m3Lime kiln: 10mg/m3



Lime kiln: 0.905t



No

Wuhan Chenming Hanyang Paper Holdings Co., Ltd.

COD Organised emission 1 East of the factory area

23.99mg/l 80mg/L 22.71t 184.30t No

Ammonia nitrogen Organised emission 1 East of the factory area

1.56mg/l 8 mg/L 1.48t 17.30t No

Sulphur dioxide Organised emission 2 Within Qianneng Electric Power factory area

130t/h furnace: 8.36mg/m3


50mg/m3 3.481t 102.58t No

Nitrogen oxide Organised emission 2 Within Qianneng Electric Power factory area



100 mg/m3 26.789t 205.16t No

Smoke Organised emission 2 Within Qianneng Electric Power factory area



20mg/m3 1.079t 41.03t No


V Material Matters



Number of emission




implementedTotal



Jiangxi Chenming Paper Co., Ltd. COD Organised emission 1 At the boundary of factory area

26.54mg/L 90mg/L 123.355t 1260t No

Ammonia nitrogen Organised emission 1 At the boundary of factory area

1.29mg/L 8mg/L 5.958t 112t No

Sulphur dioxide Organised emission 2 Within factory area 90.89mg/m3 200mg/m3 169.45t 806t NoNitrogen oxide Organised emission 2 Within factory area 81.27mg/m3 200 mg/m3 176.376t 806t NoSmoke Organised emission 2 Within factory area 10.23mg/m3 30mg/m3 12.976t 135t No

Jilin Chenming Paper Co., Ltd. COD Organised emission 1 At the boundary of factory area

43.03mg/L 90mg/L 81.25t 357t No

Ammonia nitrogen Organised emission 1 At the boundary of factory area

1.34mg/L 8mg/L 2.22t 34t No

Sulphur dioxide Organised emission 1 Within factory area 4.64mg/m3 100mg/m3 2.02t 97t NoNitrogen oxide Organised emission 1 Within factory area 32.28mg/m3 100mg/m3 10.21t 213t NoSmoke Organised emission 1 Within factory area 13.34mg/m3 30mg/m3 3.8t 51.66t No


COD Organised emission 1 Within factory area 45.612mg/L 90mg/L 414.101t 1943t NoAmmonia nitrogen Organised emission 1 Within factory area 1.439mg/L 8mg/L 12.664t 43.9t NoTotal phosphorus Organised emission 1 Within factory area 0.229mg/L 0.8mg/L 2.068t 21.36t NoTotal nitrogen Organised emission 1 Within factory area 5.195mg/L 12mg/L 46.686t 320.4t NoSmoke Organised emission 5 Within factory area Alkali recovery:

16.707mg/m3

Power plant 1#: 7.334mg/m3




Alkali recovery: 30mg/m3

1#2#3# circulating fluidised bed

boilers furnace: 30mg/m3

4#circulating fluidised bed


120.094t 196t No

Sulphur dioxide Organised emission 5 Within factory area Alkali recovery: 15.420mg/m3








4# circulating fluidised bed


119.505t 620t No

Nitrogen oxide Organised emission 5 Within factory area Alkali recovery: 160.271mg/m3








4# circulating fluidised bed


754.863t 2169.70t No

XVI. Fulfilment of Social Responsibility (Cont’d)

1. Major environmental protection matters (Cont’d)


V Material Matters



Number of emission




implementedTotal




Smoke Continuous 2 Within factory area Alkali furnace: 6.23mg/m3


Alkali furnace: 30mg/m3Lime kiln:

200mg/m3

Alkali furnace: 6.286t

Lime kiln: 1.549t


Lime kiln: 26.44 t

No

Sulphur dioxide Continuous 2 Within factory area Alkali furnace: 8.14mg/m3

Lime kiln: 88.07 mg/m3

Alkali furnace: 200mg/m3Lime kiln:

850mg/m3


Lime kiln: 13.905t


Lime kiln: 158.304 t

No

Nitrogen oxide Continuous 1 Within factory area Alkali furnace: 164.52mg/m3

Alkali furnace: 200 mg/m3


Alkali furnace: 950.882 t

No

COD Continuous 1 Within factory area 23.06 mg/m3 150 mg/L 63.86t 563.72 t NoAmmonia nitrogen Continuous 1 Within factory area 1.22 mg/m3 14 mg/L 2.88t 40.12 t No

Construction and operation of facilities for pollution prevention and control

(1) The Company and its subsidiaries strictly comply with laws, regulations and relevant rules regarding environmental protection of the central and local government. The construction of projects strictly adheres to the “three simultaneities” on environmental protection. In order to ensure pollutants are discharged strictly in accordance with the requirements under laws and regulations and disposed properly, production and operation strictly comply with the national Law on the Prevention and Control of Environmental Pollution, Law on the Prevention and Control of Water Pollution, Law on the Prevention and Control of Air Pollution, Action Plan for Prevention and Control of Water Pollution and Law on the Prevention and Control of Environmental Pollution by Solid Waste and other laws.

(2) In recent years, the Company and its subsidiaries have invested more than RMB8 billion to construct the pollution treatment facilities including the alkali recovery system, middle water treatment system, middle water reuse system, white water recovery system and black liquor comprehensive utilisation system. The environmental indicators of the Company rank high in the country and in the world. At present, the Company adopts the world’s most advanced “ultrafiltration membrane+reverse osmosis membrane” technology to complete the reclaimed water recycling membrane treatment project. The reclaimed water recycle rate reaches more than 75%. The reclaimed water quality meets drinking water standards, which can save fresh water every day 170,000 cubic metres.

(3) Each subsidiary’s organised emission outlets are equipped with an online monitoring system for real-time monitoring. All subsidiaries have their own power plants. Each self-owned plant has its own environmental protection facilities for de-dusting, desulphurisation and denitrification. Denitrification is conducted through SCR or SNCR, while desulphurisation is primarily conducted through gypsum desulphurisation (ammonia desulphurisation is adopted in the self-owned plant of Jiangxi Chenming). Substantially all of the emissions indicators are below the national and local execution standards. Other alkali recovery boilers and lime kilns are also in compliance with the emission standards.




V Material Matters



Environmental impact assessment of construction projects and other environmental protection administrative licensing

The Company has strictly complied with the environmental laws and regulations all along to carry out environmental impact assessment of construction projects. The construction projects are all subject to environmental impact assessment. During the construction process, a reasonable environmental protection project construction plan is formulated and strictly implemented. The environmental protection facilities and the main project are designed, constructed and put into operation at the same time. At present, all construction projects put into production have obtained environmental impact assessment approvals and acceptance approvals.

In June 2017, the Company and its subsidiaries completed the formalities for new discharge permits in accordance with the Measures for the Administration of Pollutant Discharge Permits of the Ministry of Environmental Protection, and the discharge permits of the new projects were renewed according to the environmental protection requirements in a timely manner.

Emergency plan for emergency environmental incidents

The Company has strictly implemented emergency regulations for emergency environmental incidents, and formulated various emergency plans for emergency environmental incidents according to the technical requirements in the “Technical Guidelines for Emergency Environmental Pollution Accidents”. The plans are reviewed by and filed with the Environmental Protection Bureau, and regular emergency training and emergency drills are conducted. Emergency measures in relation to dangerous chemicals are formulated in accordance with the environmental protection requirements. At the same time, necessary emergency supplies are provided with regular inspections and updates.

Environmental self-monitoring programme

The Company has strictly complied with self-monitoring laws and regulations, and conducted self-monitoring in accordance with the environmental protection requirements to establish and perfect the corporate environmental management ledgers and materials. At present, self-monitoring is a combination of manual monitoring and automatic monitoring. At the same time, qualified units are engaged to conduct regular monitoring. Automatically monitored items include: total wastewater discharge (COD, ammonia nitrogen, flow rate, total phosphorus, total nitrogen and PH); power plant, alkali recovery boilers and lime kiln exhaust emissions (sulphur dioxide, nitrogen oxide and smoke). Manually monitored items include: daily monitoring of COD, ammonia nitrogen, SS, chroma, PH, total phosphorus and total nitrogen indicators. Sewage and other monitoring items, unorganised exhaust emission, solid waste, and noise at the plant boundary, are monitored on a monthly or quarterly basis by qualified units engaged in accordance with the local environmental protection requirements in relation to each subsidiary.

The self-monitoring data and environmental monitoring programmes for pollutants discharge of various subsidiaries are published on the national key pollution source information disclosure website and the provincial key pollution source information disclosure websites.

Other environmental information to be disclosed

The relevant environmental protection information of the pollutant discharge permit information and the pollutant discharge permit requirements is announced on the national sewage discharge permit management information platform.

Other environmental protection related information

Other environmental protection related information is announced on the Company’s website.

2. Fulfilment of social responsibility regarding targeted poverty relief

The Company did not commence any work regarding targeted poverty relief in the first half of the year and had no follow-up targeted poverty relief plan.


V Material Matters

XVII. Other matters of significance


1. Approval of registration of super & short-term commercial paper

On 16 February 2020, the super & short-term commercial paper issue of the Company was registered and approved by the Notice of Acceptance of Registration (Zhong Shi Xie Zhu [2020] No. SCP27) of the National Association of Financial Market Institutional Investors. The super & short-term commercial paper of the Company approved for registration amounted to RMB7 billion, and the registered amount was valid for 2 years from the issue date of the notice, and can be issued in tranches during the effective term of the registration.

For details, please refer to the relevant announcement (announcement no.: 2020-005) of the Company published on CNINFO on 17 February 2020.

2. Implementation of the 2020 restricted A shares incentive scheme

For details, please refer to XII. Implementation of the equity incentive plan, employee shareholding plan or other employee incentive measure of the Company in V Material Matters of this report.

3. 2019 profit distribution plan for ordinary shares

On 19 June 2020, the Company convened the 2019 annual general meeting, at which the 2019 profit distribution plan was considered and approved: based on the total ordinary share capital of 2,904,608,200 shares and the 1,162,790,698 simulated ordinary shares converted from the preference shares using a conversion ratio of 1 share valued at RMB3.87 as at the end of 2019, a cash dividend of RMB1.5 (tax inclusive) per 10 shares will be distributed to ordinary shareholders; a cash dividend of RMB1.5 (tax inclusive) per 10 simulated ordinary shares converted from the preference shares will be distributed to holders of preference shares. No bonus shares will be issued and there is no increase of share capital from reserves. A cash dividend of RMB435,691,230 will be distributed to holders of ordinary shares and a variable cash dividend of RMB174,418,604.70 will be distributed to holders of preference shares.

For details, please refer to the relevant announcement (announcement no.: 2020-053) of the Company published on CNINFO on 20 June 2020.


V Material Matters

XVII. Other matters of significance (Cont’d)

4. Information disclosure index for the first half of 2020

Announcement no. Subject matter

Date of publication Publication website and index

2020-001 Announcement on Resolutions of the Seventh Extraordinary Meeting of the Ninth Session of the Board

8 January 2020 http://www.cninfo.com.cn

2020-002 Announcement on the Establishment of Overseas Subsidiaries by Foreign Investment


2020-003 Announcement on Pledge of Shareholders’ Shares


2020-004 Announcement on External Donations to Support the Fight Against the Novel Coronavirus Pneumonia

8 February 2020 http://www.cninfo.com.cn

2020-005 Announcement on Approval of Registration of Super & Short-term Commercial paper


2020-006 The First Indicative Announcement on the Adjustment of the Coupon Rate of “18 Chenming Bond 01” and Repurchase Measure for Bondholders


2020-007 Announcement on Resolutions of the Eighth Extraordinary Meeting of the Ninth Session of the Board


2020-008 Announcement on Resolutions of the Third Extraordinary Meeting of the Ninth Session of the Supervisory Committee


2020-009 Announcement on Delay in Increase of Shares of the Company by the Controlling Shareholder


2020-010 Notice of 2020 First Extraordinary General Meeting


2020-011 The Second Indicative Announcement on the Adjustment of the Coupon Rate of “18 Chenming Bond 01” and Repurchase Measure for Bondholders


2020-012 The Third Indicative Announcement on the Adjustment of the Coupon Rate of “18 Chenming Bond 01” and Repurchase Measure for Bondholders


2020-013 Announcement on Repurchase Report of Investor of “18 Chenming Bond 01”


2020-014 Announcement on the Continued Pledge of Shares held by Shareholders

7 March 2020 http://www.cninfo.com.cn

2020-015 Announcement on the Distribution of Dividend of Preference Share


2020-016 Announcement on Resolution of the 2020 First Extraordinary General Meeting


2020-017 Announcement on Resolutions of the Fourth Extraordinary Meeting of the Ninth Session of the Board


2020-018 Announcement on Resolutions of the Fourth Extraordinary Meeting of the Ninth Session of the Supervisory Committee



V Material Matters



2020-019 2019 Annual Report Summary 28 March 2020 http://www.cninfo.com.cn2020-020 Notice of 2019 Annual General Meeting 28 March 2020 http://www.cninfo.com.cn2020-021 Announcement on Appointment of Auditor for


2020-022 Announcement on the Cancellation of Guarantee Amount for Some Subsidiaries and the Expected Increase in New Guarantee Amount


2020-023 Announcement on the Estimated Day-to-day Related Party Transactions for 2020


2020-024 Announcement on Financial Assistance from a Subsidiary to Its Investee


2020-025 Supplemental Announcement on Estimated Day-to-day Related Party Transactions for 2020


2020-026 Announcement of Resolutions of the Ninth Extraordinary Meeting of the Ninth Session of the Board


2020-027 Announcement of Resolutions of the Fourth Extraordinary Meeting of the Ninth Session of the Supervisory Committee


2020-028 Notice of 2020 Second Extraordinary General Meeting


2020-029 Notice f 2020 First Class Meeting for Holders of Domestic-listed Shares and 2020 First Class Meeting for Holders of Overseas Listed Shares


2020-030 Announcement on Public Solicitation of Voting Rights by Independent Directors


2020-031 Announcement on Receipt of Government Subsidies by Subsidiaries


2020-032 Announcement on Repurchase Report on Bondholders of “18 Chenming Bond 01”


2020-033 Announcement on payment of 2020 interest with respect to the first tranche of corporate bonds publicly issued to qualified investors in 2018


2020-034 Announcement on Pledge of Shares held by Shareholders

7 April 2020 http://www.cninfo.com.cn

2020-035 Announcement on Estimated Results for First Quarter of 2020


2020-036 Announcement on the Release of Pledge of Shares held by Shareholders


2020-037 Reply to the inquiry letter of Shenzhen Stock Exchange Regarding Annual Report


2020-038 2020 First Quarterly Report 21 April 2020 http://www.cninfo.com.cn2020-039 Announcement on Result of the Issue of 2020

First Tranche of Super & Short-term Commercial Paper


2020-040 Announcement on Postponement of Resale of “18 Chenming Bond 01” Corporate Bonds



4. Information disclosure index for the first half of 2020 (Cont’d)


V Material Matters



2020-041 Announcement on Approval of 2020 Restricted A Share Incentive Scheme by the State-owned Assets Supervision and Administration Bureau of Shouguang City

6 May 2020 http://www.cninfo.com.cn

2020-042 The Explanation on the Status of Announcement and Review Opinions of the Supervisory Committee Regarding the List of Participants under 2020 Restricted A Share Incentive Scheme


2020-043 Self-Examination Report for the Trading of Shares of the Company by Insiders and Participants of the 2020 Restricted A Share Incentive Scheme


2020-044 Announcement on Resolutions of 2020 Second Extraordinary General Meeting, 2020 First Class Meeting for Holders of Domestic-listed Shares, and 2020 First Class Meeting for Holders of Overseas Listed Shares


2020-045 Announcement on Receipt of Government Subsidies by Subsidiaries


2020-046 Announcement on Resolutions of the Tenth Extraordinary Meeting of the Ninth Session of the Board


2020-047 Announcement on Resolutions of the Fifth Extraordinary Meeting of the Ninth session of the Supervisory Committee


2020-048 Announcement on Matters Relating to Adjustments to the 2020 Restricted A Share Incentive Scheme


2020-049 Announcement on Grant of Restricted Shares to the Participants


2020-050 Announcement on the Results of Resale of “18 Chenming Bond 01” Bonds

1 June 2020 http://www.cninfo.com.cn

2020-051 Announcement on Pledge of Shares held by Shareholders


2020-052 Explanation on Media Coverage of a Subsidiary 19 June 2020 http://www.cninfo.com.cn2020-053 Announcement on Resolutions of 2019 Annual

General Meeting20 June 2020 http://www.cninfo.com.cn

2020-054 Announcement on Resolutions of the Eleventh Extraordinary Meeting of the Ninth Session of the Board


2020-055 Announcement on Estimated Securities Investment Quota for 2020


2020-056 Supplemental Announcement on the Poll Results of 2020 Second Extraordinary Meeting, the 2020 First Class Meeting for Holders of Domestic-listed Shares, and 2020 First Class Meeting for Holders of Overseas-listed Shares



4. Information disclosure index for the first half of 2020 (Cont’d)


V Material Matters

XVIII. Matters of significant of subsidiaries of the Company


1. Outbound investment and establishment of overseas subsidiaries

The Resolution in relation to the Establishment of Overseas Subsidiaries through Outbound Investment was considered and approved at the seventh extraordinary meeting of the ninth session of the Board of the Company on 7 January 2020 to propose to establish Chenming (Overseas) Co., Ltd. and Chenming (Singapore) Co., Ltd.

For details, please refer to the relevant announcement (announcement no.: 2020-002) of the Company published on CNINFO on 7 January 2019.

2. Cancellation of the guarantee amount for some subsidiaries and the expected increase of the guarantee amount

In order to strengthen the guarantee management of its subsidiaries, effectively control the Company’s guarantee amount for its subsidiaries, combined with the capital needs and financing guarantee arrangements of its subsidiaries, the Company intended to cancel some of guarantee amount approved in the previous review but not actually used. At the same time, in order to guarantee the Company’s related subsidiaries’ project construction and normal production and operation needs, the Company intended to provide guarantees for the comprehensive credit lines to be applied by the relevant subsidiaries, with a total guarantee not exceeding RMB9,600.00 million, and the guarantee methods including security guarantee, mortgage guarantee and pledge guarantee. Among the total guarantee amount, the guarantee for subsidiaries with a gearing ratio higher than 70% amounted to RMB5,600.00 million and that for subsidiaries with a gearing ratio lower than 70% amounted to RMB4,000.00 million.

For details, please refer to the relevant announcement (announcement no.: 2020-022) of the Company published on CNINFO on 28 March 2020.

3. Explanation on matters related to media coverage of a subsidiary

For details, please refer to V Material Matters IX. Media questioning in this report.


VI Changes in Share Capital and Shareholders

I. Changes in shares

1. Changes in shares

Unit: share

Opening balance Change during the reporting period (+/-) Closing balance

Amount Percentage New issue Bonus issue

Shares converted

from reserves Others Subtotal Amount Percentage

I. Restricted shares 10,580,524 0.36% 79,600,000 0 0 -34,925 79,565,075 90,145,599 3.02% 1. Shares held by other domestic investors 10,580,524 0.36% 79,600,000 0 0 -34,925 79,565,075 90,145,599 3.02% Including: Shares held by domestic natural persons 10,580,524 0.36% 79,600,000 0 0 -34,925 79,565,075 90,145,599 3.02%II. Non-restricted shares 2,894,027,676 99.64% 0 0 0 34,925 34,925 2,894,062,601 96.98% 1. RMB ordinary shares 1,659,337,160 57.13% 0 0 0 34,925 34,925 1,659,372,085 55.61% 2. Domestic listed foreign share 706,385,266 24.32% 0 0 0 0 0 706,385,266 23.67% 3. Overseas listed foreign shares 528,305,250 18.19% 0 0 0 0 0 528,305,250 17.70%III. Total number of shares 2,904,608,200 100.00% 79,600,000 0 0 0 79,600,000 2,984,208,200 100.00%

The reasons for such changes


① According to the Practice Guidance for the Company’s Shares Held by the Directors, Supervisors and Senior Management of the Listed Companies of Shenzhen Stock Exchange, during the reporting period, 34,925 restricted RMB ordinary shares (A shares) held by Directors and the senior management who resigned became non-restricted shares.

② On 28 June 2020, Grant Thornton issued a Capital Verification Report (Zhi Tong Yan Zi (2020) No. 371ZC00199), in which they verified the Company’s subscription contribution status for the 2020 Restricted A Share Incentive Scheme as of 23 June 2020, and determined that the total share capital of the Company changed to 2,984,208,200 shares. On 15 July 2020, 79,600,000 shares granted to the participants under the 2020 Restricted A Shares Incentive Scheme of the Company were issued and listed. The restricted shares of the Company subject to trading moratorium were increased to 90,145,599 shares.

Approval of changes in shareholding


For details, please refer to XII. Implementation of the equity incentive plan, employee shareholding plan or other employee incentive measure of the Company in V Material Matters.

Transfer of shares arising from changes in shareholding


Progress of share repurchase


Progress of decrease in the holding of repurchased shares by way of bidding




I. Changes in shares (Cont’d)

1. Changes in shares (Cont’d)

The effects of changes in shareholding on financial indicators such as basic earnings per share, diluted earnings per share and net assets per share attributable to ordinary shareholders of the Company for the latest year and the latest period


Other information considered necessary by the Company or required by the securities regulatory authorities to be disclosed


2. Changes in restricted shares of Directors, Supervisors and Senior Management


Unit: share

Name of shareholder

Restricted shares at the

beginning of period

Restricted shares released

during the period

Restricted shares increased during the period

Restricted shares at the

end of the periodReason for restriction

Date of release from restriction

Chen Gang 139,700 34,925 0 104,775 Locked-up shares held by directors, supervisors and senior management

Under relevant requirements for shares held by directors, supervisors and senior management

Total 139,700 34,925 0 104,775 – –

Explanation of changes in other restricted shares: On 15 July 2020, 79,600,000 shares granted to the participants under the 2020 Restricted A Shares Incentive Scheme of the Company were issued and listed. The total number of shares of the Company was changed to 2,984,208,200 shares and restricted shares of the Company subject to trading moratorium were increased to 90,145,599 shares. For details of changes in shares, please refer to XI. Changes in Share Capital and Shareholders. I. 1. Changes in shares as at the disclosure date of the report.

II. Issuance and listing of securities


Name of shares and its derivatives Date of issue

Issue price (or interest rate) Issue size Listing date

With listing permission Delisting date Disclosure index Disclosure date

SharesEquity incentive restricted shares

15 July 2020 RMB2.85/share 79,600,000 15 July 2020 79,600,000 N/A http://www.cninfo.com.cn 15 July 2020



III. Total number of shareholders and shareholdings

Unit: share

Total number of ordinary shareholders as at the end of the reporting period

109,060, of which 88,863 were holders of A shares, 19,834 were holders of B shares and 363 were holders of H shares

Total number of holders of preference shares with restored voting right as at the end of the reporting period (if any) 0

Shareholdings of ordinary shareholders interested in more than 5% of the shares of the Company or Top 10 ordinary shareholders

Number of shares held

at the end of

Changes (increase or

decrease) during the Number of Number of Share pledged or locked-up

Name of shareholder Nature of shareholderPercentage of shareholding


reporting period

restricted shares held

non-restrict shares held

Status of shares Number

CHENMING HOLDINGS COMPANY LIMITED State-owned legal person 14.93% 445,396,128 Pledge 322,700,000

HKSCC NOMINEES LIMITED Overseas legal person 12.51% 373,325,625 161,750

CHENMING HOLDINGS (HONG KONG) LIMITED Overseas legal person 12.20% 364,131,563

CENTRAL HUIJIN ASSET MANAGEMENT LTD. State-owned legal person 2.02% 60,206,850

Chen Hongguo Domestic natural person 1.04% 31,080,044 20,000,000 28,310,033 2,770,011

HONG KONG SECURITIES CLEARING COMPANY LIMITED

Overseas legal person 0.79% 23,434,111 10,195,648

VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND

Overseas legal person 0.49% 14,603,170 1,988,000

VANGUARD EMERGING MARKETS STOCK INDEX FUND

Overseas legal person 0.44% 13,121,946 209,589

Chen Suiqiang Domestic natural person 0.43% 12,800,000 1,789,800

National Social Security Fund 418 Others 0.42% 12,633,902 9,427,651

Related party relationship or acting in concert among the above shareholders

A shareholder, Chenming Holdings (Hong Kong) Limited, which is an overseas legal person, is a wholly-owned subsidiary of a shareholder, Chenming Holdings Company Limited, which is a state-owned legal person. Hence, they are persons acting in concert under the Measures for the Administration of Disclosure of Shareholder Equity Changes of Listed Companies. A shareholder, Chen Hongguo, is the legal representative, chairman and general manager of Chenming Holdings Company Limited. Save for the above, it is not aware that any other shareholders of tradable shares are persons acting in concert. It is also not aware that any other shareholders of tradable shares are related to each other.

Other explanation: On 28 June 2020, Grant Thornton issued a Capital Verification Report, in which they verified the Company’s subscription contribution status for the 2020 Restricted A Share Incentive Scheme as of 23 June 2020, and determined that the total share capital of the Company changed to 2,984,208,200 shares.

On 15 July 2020, 79,600,000 restricted shares granted to the participants were issued and listed. The number of shares held by Mr. Chen Hongguo changed to 31,080,044 shares.



III. Total number of shareholders and shareholdings (Cont’d)

Shareholdings of the top ten non-restricted ordinary shareholders

Name of shareholder

Number of non-restricted

ordinary shares held as at the

end of the

Class of shares

reporting period Class of shares Number

CHENMING HOLDINGS COMPANY LIMITED 445,396,128 RMB ordinary shares 445,396,128

HKSCC NOMINEES LIMITED 373,325,625 Domestic listed foreign shares 373,325,625

CHENMING HOLDINGS (HONG KONG) LIMITED 364,131,563 Domestic listed foreign shares 210,717,563

Overseas listed foreign shares 153,414,000

CENTRAL HUIJIN ASSET MANAGEMENT LTD. 60,206,850 RMB ordinary shares 60,206,850

HONG KONG SECURITIES CLEARING COMPANY LIMITED 23,434,111 RMB ordinary shares 23,434,111

VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND 14,603,170 Domestic listed foreign shares 14,603,170

VANGUARD EMERGING MARKETS STOCK INDEX FUND 13,121,946 Domestic listed foreign shares 13,121,946

Chen Suiqiang 12,800,000 RMB ordinary shares 12,800,000

National Social Security Fund 418 12,633,902 RMB ordinary shares 12,633,902

CITIC Securities Co., Ltd.-Social Security Fund 1106 Portfolio 10,679,175 RMB ordinary shares 10,679,175

Related party relationship or acting in concert among the top ten non-restricted ordinary shareholders of, and between the top ten non-restricted ordinary shareholders and the top ten ordinary shareholders

A shareholder, Chenming Holdings (Hong Kong) Limited, which is an overseas legal person, is a wholly-owned subsidiary of a shareholder, Chenming Holdings Company Limited, which is a state-owned legal person. Hence, they are persons acting in concert under the Measures for the Administration of Disclosure of Shareholder Equity Changes of Listed Companies. Save for the above, it is not aware that any other shareholders of tradable shares are persons acting in concert. It is also not aware that any other shareholders of tradable shares are related to each other.

Securities margin trading of top 10 ordinary shareholders, if any

Chenming Holdings Company Limited held 445,396,128 RMB ordinary shares, of which 402,196,128 shares were held through ordinary account and 43,200,000 shares were held through credit guarantee security account. Chen Suiqiang held 12,800,000 RMB ordinary shares, of which 0 share was held through ordinary account and 12,800,000 shares were held through credit guarantee security account.



III. Total number of shareholders and shareholdings (Cont’d)

Whether an agreed repurchase transaction was entered into during the reporting period by the top 10 ordinary shareholders and top 10 non-restricted ordinary shareholders of the Company

□ Yes √ No

IV. Change of controlling shareholders or beneficial controllers

The change of controlling shareholders during the reporting period


There was no change of controlling shareholders of the Company during the reporting period.

Change of beneficial controllers during the reporting period


There was no change of beneficial controllers of the Company during the reporting period.


VII Preference Shares


I. Issue and listing of preference shares during the reporting period


There was no issue and listing of preference shares during the reporting period.

II. Holders of preference shares and their shareholdings

Unit: share

Total number of shareholders of preference shares as at the end of the reporting period 8Shareholding of holders interested in more than 5% of the preference shares or top ten holders of preference shares

Name of shareholder Nature of shareholderPreference

shareholding

Number of preference

shares held at the end of the reporting

period

Changes (increase or

decrease) during the reporting

period Share pledged or locked-upStatus of

shares Number

BEIJING YIBEN ZHONGXING INVESTMENT MANAGEMENT CO., LTD.

Domestic non-state-owned legal person

27.78% 12,500,000 0 Pledged 12,500,000

BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO., LTD. – HUILI NO.167 SINGLE CAPITAL TRUST

Others 22.44% 10,100,000 0

BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO., LTD. – HUILI NO.136 SINGLE CAPITAL TRUST

Others 14.22% 6,400,000 0

QILU BANK CO., LTD. – QILU BANK QUANXIN WEALTH MANAGEMENT PRODUCT SERIES

Others 13.33% 6,000,000 0

HENGFENG BANK CO., LTD. Domestic non-state-owned legal person

11.11% 5,000,000 0

SHANGHAI SHIJIE BUSINESS CONSULTING CO., LTD.

Domestic non-state-owned legal person

8.59% 3,867,000 2,867,000

LEAD CAPITAL MANAGEMENT CO., LTD.- LEAD CAPITAL – LI DE YING NO. 1 ASSET MANAGEMENT PLAN

Others 1.51% 680,000 680,000

LEAD CAPITAL MANAGEMENT CO., LTD. – LEAD CAPITAL- LI DE YING NO. 2 ASSET MANAGEMENT PLAN

Others 1.01% 453,000 453,000

Description of different requirements on other terms of preference shares held other than dividend distribution and residual property distribution (Note 4)

Nil

Related party relationship or acting in concert among the top ten holders of preference shares, and between the top ten holders of preference shares and the top ten ordinary shareholders

The aforesaid holders of preference shares, “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO., LTD. – HUILI NO.167 SINGLE CAPITAL TRUST” and “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO., LTD. – HUILI NO.136 SINGLE CAPITAL TRUST”, and “LEAD CAPITAL MANAGEMENT CO., LTD.－LEAD CAPITAL－LI DE YING NO.1 ASSET MANAGEMENT PLAN” and “LEAD CAPITAL MANAGEMENT CO., LTD.－LEAD CAPITAL－LI DE YING NO.2 ASSET MANAGEMENT PLAN”, are persons acting in concert. Save for the above, it is not aware that whether the remaining holders of preference shares are persons acting in concert. It is also not aware that the top ten holders of preference shares and the aforesaid ordinary shareholders are related to each other.


VII Preference Shares

III. Repurchase or conversion


There was no repurchase or conversion during the reporting period.

IV. Resumption and exercise of voting rights


There was no resumption and exercise of voting rights conferred by preference shares during the reporting period.

V. Accounting policy and reasons thereof


Pursuant to requirements of Accounting Standard for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments, Accounting Standard for Business Enterprises No. 37 – Presentation of Financial Instruments and Provisions for Differentiation between Financial Instruments and Equity Instruments and Relevant Accounting Treatment, the preference shares were accounted for as equity instruments as their terms satisfied requirements for such treatments.


VIII Directors, Supervisors and Senior Management

I. Changes in shareholding of Directors, Supervisors and Senior Management as at the disclosure date of the report


Name Position Status

Shares held as at the

beginning of the period

(shares)

Increase in the number

of shares held during the period

(shares)

Decrease in the number

of shares held during the period

(shares)

Restricted shares

granted as at the

disclosure date of

the report (shares)

Shares held (including restricted shares to

be granted) as at the

disclosure date of

the report (shares)

Chen Hongguo Chairman In office 11,080,044 0 0 20,000,000 31,080,044

Hu Changqing Vice Chairman In office 42,857 0 0 5,000,000 5,042,857

Li Xingchun Vice Chairman In office 0 0 0 5,000,000 5,000,000

Li Feng Director and General manager In office 906,027 0 0 3,000,000 3,906,027

Li Xueqin Deputy general manager In office 861,322 0 0 3,000,000 3,861,322

Geng Guanglin Deputy general manager In office 716,950 0 0 2,000,000 2,716,950

Li Weixian Deputy general manager In office 240,200 0 0 2,000,000 2,240,200

Li Zhenzhong Deputy general manager In office 113,000 0 0 2,000,000 2,113,000

Dong Lianming Financial controller In office 69,600 0 0 1,000,000 1,069,600

Yuan Xikun Secretary to the Board In office 44,700 0 0 300,000 344,700

Total – – 14,074,700 0 0 43,300,000 57,374,700

II. Changes of Directors, Supervisors and Senior Management of the Company


Name Position Type Date Reason

Li Feng Director and general manager

Elected 19 June 2020 Elected as a Director at the fourth meeting of the ninth session of the Board, which was considered and approved at the 2019 annual general meeting

Chen Gang Director and deputy general manager

Resignation 2 December 2019 Resignation from the position due to personal reasons


IX Corporate Bonds

Are there any corporate bonds offered to the public by the Company and listed on stock exchanges which do not become due as at the date of approval of the interim report or overdue but not fully settled?

Yes

I. Basic information on corporate bonds

Name of bondBond

abbreviation Bond code Issue date Maturity date

Outstanding amount of the bonds

(RMB’0,000) Interest rate Payment method

T h e p u b l i c i s s u a n c e o f the corporate bonds of S h a n d o n g C h e n m i n g Paper Holdings Limited to qualified investors in 2017 (tranche I)

17 Chenming Bond 01

112570 17 August 2017

21 August 2022

9,000 7.28% Interest is paid annually. The principal amount and the last interest payment will be paid on the maturity date.

T h e p u b l i c i s s u a n c e o f the corporate bonds of S h a n d o n g C h e n m i n g Paper Holdings Limited to qualified investors in 2018 (tranche I)

18 Chenming Bond 01

112641 29 March 2018

2 April 2023 35,000 7.60% Interest is paid annually. The principal amount and the last interest payment will be paid on the maturity date.

Stock exchange on which corporate bonds are listed or transferred

Shenzhen Stock Exchange

Investor eligibility arrangement Online subscription: Public investors with A share security account opened under China Securities Depository and Clearing Co., Ltd. Offline subscription: Institutional investors with A share security account opened under China Securities Depository and Clearing Co., Ltd.

Interest payment of corporate bonds during the reporting period

The payment of principal and interest for the bond repurchase portion of 18 Chenming Bond 01 was completed on 2 April 2019, and the resale of the bonds was completed during the reporting period. The number of the resale was 3,500,000, and the average resale price was RMB100 each. For details, please refer to the relevant announcements as disclosed on 19 February, 11 February, 25 February, 28 February, 31 March, 30 April and 1 June 2020.

Performance of relevant terms during the reporting period, for special terms such as issuer or investor option and interchangeability term for corporate bonds (if any)

Both 17 Chenming Bond 01 and 18 Chenming Bond 01 are attached with options for the issuer to adjust the coupon rate and for investors to resell. The issuer has the right to determine the adjustment to the coupon rate for the following 3 years at the end of the second year and the adjustment to the coupon rate for the following year at the end of the fourth year. After issuing the announcement on whether the coupon rate of the relevant tranche of bonds will be adjusted and the range of adjustment, the investors have the right to register for reselling during the period as announced to resell all or part of the relevant tranche of bonds held to the issuer at par value.


IX Corporate Bonds

II. Information on bond custodian and credit rating agency

Bond custodian:Name GF Securities Co., Ltd. Office address 38th Floor, Metro Plaza,

No.183 Tianhe North Road, Guangzhou

Contact person Xu Duwei Telephone of contact person

020-87555888

Credit rating agency(ies) which conducted rating on corporate bonds during the reporting period:Name China Chengxin International Credit

Rating Co.Ltd.Office address Suite 60101, Unit 1, No. 2 Nanzhugan Lane, Dongcheng District,

Beijing

Reason of change, procedures to be performed and impacts on interests of investors, etc. in case the bond trustee and credit rating agency engaged by the Company during the reporting period have changed (if applicable)

No change during the reporting period.

III. Use of proceeds from corporate bonds

Use of proceeds from corporate bonds and its implementation

The use of proceeds from issuance of corporate bonds has strictly completed relevant application and approval procedures. As at the end of the reporting period, the proceeds from 17 Chenming Bond 01 and 18 Chenming Bond 01 were fully used.

Balance as at the end of the period (RMB’0,000) 0Operation of special account for proceeds Special account for proceeds is used for the deposit of special capital

from bonds.Is the use of proceeds consistent with the use of

proceeds guaranteed under the prospectus, proposed use of proceeds and other agreement?

Yes

IV. Credit rating of corporate bonds

The credit rating of 18 Chenming Bond 01 as granted by China Chengxin International Credit Rating Co. Ltd. remained at AA+, and the credit rating for the Company remained at AA+ (stable outlook). The 2018 public issuance of the corporate bonds (tranche I) updated rating report (2020) was published on CNINFO on 28 May 2020.

The credit rating of 17 Chenming Bond 01 as granted by China Chengxin International Credit Rating Co. Ltd. remained at AA+, and the credit rating for the Company remained at AA+ (stable outlook). The 2017 public issuance of the corporate bonds (tranche I) updated rating report (2020) was published on CNINFO on 28 May 2020.


IX Corporate Bonds

V. Credit enhancement mechanism, repayment plan and other repayment guarantee measures for corporate bonds

There was no change in credit enhancement mechanism, repayment plan and other repayment guarantee measures, which were consistent with relevant commitments as set out in the prospectuses, during the reporting period.

VI. Convening of meeting for bondholders during the reporting period

There was no meeting for bondholders during the reporting period.

VII. Performance of bond custodian during the reporting period

The bond custodian performed its duties in accordance with the agreement during the reporting period.

VIII. Major accounting data and financial indicators of the Company as at the end of the reporting period and last year (or for the reporting period and the corresponding period last year)

ItemAs at the end of

the reporting periodAs at the end of

the prior year

Increase/decrease as at the end of the reporting period as

compared to the end of the prior year

Gearing ratio 82.81% 85.30% -2.49%Current ratio 73.49% 73.11% 0.38%Quick ratio 72.80% 76.24% -3.44%

The reporting period

The corresponding period of the

prior year

Increase/decrease of the reporting

period as compared to corresponding


EBITDA interest coverage ratio 2.75 2.20 25%Loans payment ratio 100.00% 100.00% 0.00%Interest payment ratio 100.00% 100.00% 0.00%

Major reason for more than 30% in year-on-year change for the above accounting data and financial indicators:


EBITDA interest coverage ratio recorded an increase of 25% mainly due to the year-on-year decrease of interest expenses during the reporting period.


IX Corporate Bonds

IX. Overdue liabilities


The Company did not have any liabilities overdue.

X. Interest payment on other bonds, debt and financing instruments during the reporting period

Unit: RMB

Item Amount of interest payment

Corporate bonds 965,520,000.00Super & short-term commercial papers 198,830,327.86

Total 1,164,350,327.86

XI. Bank credit obtained, its use and repayment of bank loans during the reporting period

During the reporting period, the Company obtained bank credit of RMB82.8 billion, of which RMB47.4 billion was utilised and RMB35.4 billion outstanding. The Company repaid bank loans of RMB14.3 billion.

XII. Performance of relevant agreements or commitments under the prospectus of corporate bonds during the reporting period

Nil

XIII. Matters of significance during the reporting period

Nil

XIV. Is there any guarantor for corporate bonds?

□ Yes √ No


X Financial Report

I. Auditors’ Report

Is the interim report audited

□ Yes √ No

The interim financial report is unaudited.

II. Financial Statements

The unit in the notes to the financial statements is: RMB

1. Consolidated Balance Sheet

Prepared by: Shandong Chenming Paper Holdings Limited

30 June 2020

Unit: RMB

Item 30 June 2020 31 December 2019

CURRENT ASSETS: Monetary funds 19,301,761,154.66 19,306,529,473.33 Accounts receivable 2,297,695,446.74 2,525,083,311.03 Accounts receivable financing 1,418,702,732.26 442,915,861.70 Prepayments 731,403,235.76 603,573,549.08 Other receivables 3,129,061,804.47 2,216,654,598.66 Dividend receivable 13,000,000.00 13,000,000.00 Inventories 5,701,570,848.39 4,774,430,110.81 Non-current assets due within one year 6,010,580,174.26 6,974,539,613.30 Other current assets 8,558,407,649.13 8,108,707,394.70

Total current assets 47,149,183,045.67 44,952,433,912.61

Long-term receivables 763,545,520.11 1,200,575,810.95 Long-term equity investments 3,767,254,464.70 3,606,339,023.74 Other non-current financial assets 147,445,653.55 147,445,653.55 Investment property 5,198,377,514.70 5,082,362,293.11 Fixed assets 38,215,983,514.51 34,439,935,032.69 Construction in progress 598,051,166.87 5,476,122,928.95 Right-of-use assets 149,450,409.35 152,141,882.05 Intangible assets 1,659,117,513.78 1,781,061,904.51 Goodwill 5,969,626.57 5,969,626.57 Long-term prepaid expenses 50,949,493.93 48,203,408.71 Deferred income tax assets 960,555,695.05 892,442,631.04 Other non-current assets 368,196,053.27 173,875,826.67

Total non-current assets 51,884,896,626.39 53,006,476,022.54

Total assets 99,034,079,672.06 97,958,909,935.15


X Financial Report


Short-term borrowings 38,554,311,235.00 36,883,156,014.19 Derivative financial liabilities Bills payable 2,747,606,761.17 1,515,048,206.00 Accounts payable 4,244,906,425.30 4,351,087,581.98 Contract liabilities 1,230,606,297.46 968,082,063.13 Employee benefits payable 231,418,118.45 190,229,883.52 Taxes payable 383,277,519.38 311,554,116.73 Other payables 2,453,998,030.51 2,594,249,626.54 Including: Interest payable 149,518,233.84 208,189,699.15 Dividend payable 610,109,667.16 Non-current liabilities due within one year 6,936,859,454.99 5,662,958,920.03 Other current liabilities 150,686,164.01 222,402,500.00

Total current liabilities 56,933,670,006.27 52,698,768,912.12

Long-term borrowings 7,009,361,701.92 9,140,339,693.56 Bonds payable 1,628,134,192.59 1,258,270,909.49 Lease liabilities 60,271,769.90 59,697,128.65 Long-term payables 2,748,780,858.47 3,321,535,538.94 Provisions 325,259,082.28 325,259,082.28 Deferred income 1,692,501,835.30 1,771,013,335.11 Deferred income tax liabilities 1,411,125.59 Other non-current liabilities 2,384,489,390.18 3,042,841,328.86

Total non-current liabilities 15,848,798,830.64 18,920,368,142.48

TOTAL LIABILITIES 72,782,468,836.91 71,619,137,054.60

II. Financial Statements (Cont’d)

1. Consolidated Balance Sheet (Cont’d)

30 June 2020 (Cont’d)


X Financial Report


Share capital 2,984,208,200.00 2,904,608,200.00 Other equity instruments 7,465,500,000.00 7,465,500,000.00 Including: Preference shares 4,477,500,000.00 4,477,500,000.00 Perpetual bonds 2,988,000,000.00 2,988,000,000.00 Capital reserves 5,264,000,531.30 5,086,686,427.30 Less: Treasury shares 226,860,000.00 Other comprehensive income -979,734,467.41 -879,452,135.10 Surplus reserves 1,212,009,109.97 1,212,009,109.97 General risk provisions 74,122,644.20 74,122,644.20 Retained profit 9,114,386,653.70 9,306,269,617.38

Total equity attributable to owners of the Company 24,907,632,671.76 25,169,743,863.75 Minority interest 1,343,978,163.39 1,170,029,016.80

Total owners’ equity 26,251,610,835.15 26,339,772,880.55

TOTAL LIABILITIES AND OWNERS’ EQUITY 99,034,079,672.06 97,958,909,935.15

Legal Representative: Financial controller: Head of the financial department:Chen Hongguo Dong Lianming Zhang Bo


1. Consolidated Balance Sheet (Cont’d)

30 June 2020 (Cont’d)


X Financial Report


2. Balance sheet of the Company

Unit: RMB


CURRENT ASSETS: Monetary funds 7,082,756,804.82 9,001,257,324.52 Bills receivable 1,618,500,000.00 3,254,460,000.00 Accounts receivable 953,020,387.81 39,204,670.00 Accounts receivable financing 245,133,081.69 189,873,567.14 Prepayments 200,265,805.92 722,472,479.01 Other receivables 13,615,203,417.43 13,975,590,537.58 Inventories 1,036,370,683.92 696,487,727.53 Non-current assets due within one year 20,557,909.14 129,546,826.00 Other current assets 78,459,437.08 80,815,659.84

Total current assets 24,850,267,527.81 28,089,708,791.62

NON-CURRENT ASSETS: Long-term receivables 418,750,862.51 418,750,862.51 Long-term equity investments 23,695,209,348.94 23,629,780,317.87 Investment in other equity instruments 3,000,000.00 Other non-current financial assets 147,445,653.55 147,445,653.55 Fixed assets 3,809,789,595.98 3,901,007,932.88 Construction in progress 336,462,019.25 350,623,821.42 Intangible assets 440,462,302.74 446,430,156.00 Deferred income tax assets 426,746,817.16 426,711,909.98 Other non-current assets 110,930,000.00 110,930,000.00

Total non-current assets 29,385,796,600.13 29,434,680,654.21

Total assets 54,236,064,127.94 57,524,389,445.83

CURRENT LIABILITIES: Short-term borrowings 12,202,091,264.37 11,601,509,632.09 Bills payable 9,145,715,195.57 9,890,041,170.20 Accounts payable 809,163,079.28 833,526,295.40 Contract liabilities 3,421,108,987.13 2,096,436,345.90 Employee benefits payable 78,493,509.03 71,040,017.13 Taxes payable 71,924,808.22 76,872,851.56 Other payables 4,392,332,152.34 6,426,648,847.95 Including: Interest payable 109,263,749.98 127,278,083.35 Dividend payable 610,109,667.16 Non-current liabilities due within one year 2,709,973,345.32 3,695,934,663.30 Other current liabilities 301,864,166.67 932,402,500.00

Total current liabilities 33,132,666,507.93 35,624,412,323.53


X Financial Report


NON-CURRENT LIABILITIES: Long-term borrowings 350,692,035.94 150,692,035.94 Bonds payable 439,943,750.00 89,070,000.00 Long-term payables 751,402,372.22 1,167,426,124.98 Provisions 325,259,082.28 325,259,082.28 Deferred income 39,900,252.91 42,070,840.27 Other non-current liabilities 1,792,083,342.67 2,789,283,340.67

Total non-current liabilities 3,699,280,836.02 4,563,801,424.14

TOTAL LIABILITIES 36,831,947,343.95 40,188,213,747.67

OWNERS’ EQUITY: Share capital 2,984,208,200.00 2,904,608,200.00 Other equity instruments 7,465,500,000.00 7,465,500,000.00 Including: Preference shares 4,477,500,000.00 4,477,500,000.00 Perpetual bonds 2,988,000,000.00 2,988,000,000.00 Capital reserves 5,099,821,539.19 4,953,557,435.19 Less: Treasury shares 226,860,000.00 Surplus reserves 1,199,819,528.06 1,199,819,528.06 Retained profit 881,627,516.74 812,690,534.91

Total owners’ equity 17,404,116,783.99 17,336,175,698.16

TOTAL LIABILITIES AND OWNERS’ EQUITY 54,236,064,127.94 57,524,389,445.83



2. Balance sheet of the Company (Cont’d)


X Financial Report


3. Consolidated Income Statement

Unit: RMB

Item January to June 2020 January to June 2019

I. Total revenue 13,599,805,765.86 13,348,648,113.70Including: Revenue 13,599,805,765.86 13,348,648,113.70

II. Total operating costs 13,331,852,506.55 12,989,921,141.46Including: Operating costs 10,185,300,033.31 9,754,097,799.82

Taxes and surcharges 107,048,098.21 134,488,545.06 Sales and distribution expenses 652,742,420.35 590,584,957.47 General and administrative expenses 491,987,245.33 562,417,399.25 Research and development expense 548,557,146.89 431,483,716.06 Finance expenses 1,346,217,562.46 1,516,848,723.80

Including: Interest expenses 1,439,500,160.77 1,576,756,279.30 Interest income 276,115,018.97 213,994,280.22

Plus: Other income 133,433,974.45 38,831,290.64 Investment income (“-” denotes loss) 136,893,482.97 -9,467,172.97

Including: Investment income from associates and joint ventures 122,749,789.02 -9,467,172.97

Gain on change in fair value (“-” denotes loss) -9,246,743.86 -1,883,064.80 Credit impairment loss (“-” denotes loss) -257,855,903.60 -62,440,283.34 Loss on impairment of assets (“-” denotes loss) -163,717.76 83,464,107.59 Gain on disposal of assets (“-” denotes loss) -4,705,886.89 22,823,551.43

III. Operating profit (“-” denotes loss) 266,308,464.62 430,055,400.79Plus: Non-operating income 642,400,117.78 237,472,592.97Less: Non-operating expenses 9,007,544.18 5,050,128.19

IV. Total profit (“-” denotes total loss) 899,701,038.22 662,477,865.57Less: Income tax expenses 237,960,188.15 125,877,819.62

V. Net profit (“-” denotes net loss) 661,740,850.07 536,600,045.95(I) Classification according to the continuity of operation

1. Net profit from continuing operations (“-” denotes net loss) 661,740,850.07 536,600,045.95

2. Net profit from discontinued operations (“-” denotes net loss)

(II) Classification according to ownership1. Net profit attributable to shareholders

of the Company 516,326,703.48 509,795,572.292. Profit or loss of minority interest 145,414,146.59 26,804,473.66

VI. Net other comprehensive income after tax -108,564,087.60 -16,016,688.20Net other comprehensive income after tax attributable to shareholders of the Company -108,564,087.60 -16,016,688.20(I) Other comprehensive income that cannot be reclassified

to profit and loss in subsequent periods(II) Other comprehensive income that will be reclassified

to profit and loss in subsequent periods -108,564,087.60 -16,016,688.20Translation differences of financial statements denominated in foreign currency -108,564,087.60 -16,016,688.20


X Financial Report


VII. Total comprehensive income 553,176,762.47 520,583,357.75

Total comprehensive income attributable to shareholders of the Company 407,762,615.88 493,778,884.09

Total comprehensive income attributable to minority interest 145,414,146.59 26,804,473.66

VIII. Earnings per share:(I) Basic earnings per share 0.051 0.013(II) Diluted earnings per share 0.051 0.013



3. Consolidated Income Statement (Cont’d)


X Financial Report


4. Income statement of the Company

Unit: RMB


I. Revenue 3,847,193,657.53 2,696,012,416.10Less: Operating costs 3,028,473,472.42 2,103,287,151.64 Taxes and surcharges 20,730,087.42 22,384,520.78 Sales and distribution expenses 124,148,775.89 95,933,113.16 General and administrative expenses 159,106,436.16 160,401,795.91 Research and development expense 128,662,995.77 122,265,471.50 Finance expenses 380,567,325.04 851,438,574.25 Including: Interest expenses 803,815,024.42 1,297,180,410.46

Interest income 512,123,486.08 524,005,473.68Plus: Other income 4,164,682.46 2,180,872.36 Investment income (“-” denotes loss) 682,669,031.07 1,010,553,143.57 Including: Investment income from associates and joint ventures -1,660,968.93 -12,799,856.43 Impairment loss of credit (“-” denotes loss) 15,237,901.51 -844,738.21 Impairment loss of assets (“-” denotes loss) Gains from assets disposal (“-” denotes loss) 16,102,859.30 22,416,169.42

II. Operating profit (“-” denotes loss) 723,679,039.17 374,607,236.00Plus: Non-operating income 54,685,565.61 77,943,339.00Less: Non-operating expenses 1,252,862.97 4,195,926.11

III. Total profit (“-” denotes total loss) 777,111,741.81 448,354,648.89Less: Income tax expenses -34,907.18 -96,575,704.73

IV. Net profit (“-” denotes net loss) 777,146,648.99 544,930,353.62(1) Net profit from continuing operations

(“-” denotes net loss) 777,146,648.99 544,930,353.62(2) Net profit from discontinued operations

(“-” denotes net loss)

VI. Total comprehensive income 777,146,648.99 544,930,353.62

VII. Earnings per share:(I) Basic earnings per share(II) Diluted earnings per share



X Financial Report


5. Consolidated cash flow statement

Unit: RMB


I. Cash flows from operating activities: Cash received from sales of goods and rendering of services 14,322,440,708.60 14,748,713,123.70 Tax rebates received 1,619,978.70 660,483.85 Cash received relating to other operating activities 1,563,110,217.95 2,298,196,240.97

Subtotal of cash inflows from operating activities 15,887,170,905.25 17,047,569,848.52

Cash paid for goods and services 11,303,287,012.69 11,576,281,103.39 Cash paid to and for employees 550,988,794.51 674,527,204.40 Payments of taxes and surcharges 622,011,647.05 1,096,901,907.86 Cash paid relating to other operating activities 1,083,849,666.32 1,000,088,741.18

Subtotal of cash outflows from operating activities 13,560,137,120.57 14,347,798,956.83

Net cash flows from operating activities 2,327,033,784.68 2,699,770,891.69

II. Cash flow from investing activities: Cash received from investment income 1,200,000.00 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 85,956,320.00 111,235,000.00 Net cash received from disposal of subsidiaries and other business units 217,547,669.15 Cash received relating to other investing activities 129,197,968.06

Subtotal of cash inflows from investing activities 433,901,957.21 111,235,000.00

Cash paid for purchase of fixed assets, intangible assets and other long-term assets 143,811,622.89 376,939,086.06 Cash paid on investments 19,266,800.00 1,639,194,479.24 Cash paid relating to other investing activities 176,000,000.00 189,628,400.00

Subtotal of cash outflows from investing activities 339,078,422.89 2,205,761,965.30

Net cash flows from investing activities 94,823,534.32 -2,094,526,965.30


X Financial Report


III. Cash flows from financing activities: Cash received from investments 294,820,000.00 Including: Cash received from by subsidiaries

from minority investment 67,960,000.00 Cash received from borrowings 15,228,878,371.99 22,550,704,467.77 Cash received relating to other financing activities 1,356,957,000.00 3,479,693,527.06

Subtotal of cash inflows from financing activities 16,880,655,371.99 26,030,397,994.83

Cash repayments of amounts borrowed 14,282,539,084.68 18,763,676,782.15 Cash paid for dividend and profit distribution

or interest payment 1,710,006,370.47 1,591,133,614.29 Including: Dividend and profit paid by subsidiaries

to minority shareholders 8,375,000.00 Cash paid relating to other financing activities 3,982,494,113.94 6,456,564,308.43

Subtotal of cash outflows from financing activities 19,975,039,569.09 26,811,374,704.87

Net cash flows from financing activities -3,094,384,197.10 -780,976,710.04

IV. Effect of foreign exchange rate changes on cash and cash equivalents -4,518,518.54 -196,762,227.50

V. Net increase in cash and cash equivalents -677,045,396.64 -372,495,011.15Plus: Balance of cash and cash equivalents at the beginning of the period 2,890,328,027.40 2,381,558,242.52

VI. Balance of cash and cash equivalents as at the end of the period 2,213,282,630.76 2,009,063,231.37



5. Consolidated cash flow statement (Cont’d)


X Financial Report


6. Cash flow statement of the Company

Unit: RMB


1. Cash flows from operating activities: Cash received from sales of goods and rendering of services 4,646,172,812.15 4,975,401,290.02 Cash received relating to other operating activities 155,230,403.66 974,266,183.30

Subtotal of cash inflows from operating activities 4,801,403,215.81 5,949,667,473.32

Cash paid for goods and services 2,208,540,497.88 949,039,632.39 Cash paid to and for employees 174,694,134.98 232,441,602.15 Payments of taxes and surcharges 58,848,554.36 85,040,472.23 Cash paid relating to other operating activities 450,670,347.73 643,575,724.57

Subtotal of cash outflows from operating activities 2,892,753,534.95 1,910,097,431.34

Net cash flows from operating activities 1,908,649,680.86 4,039,570,041.98

II. Cash flows from investing activities: Cash received from investments 217,547,669.15 Cash received from investment income 682,430,000.00 Net cash received from disposal of fixed assets,

intangible assets and other long-term assets 85,956,320.00 55,735,000.00 Cash received relating to other investing activities 129,197,968.06

Subtotal of cash inflows from investing activities 1,115,131,957.21 55,735,000.00

Cash paid for purchase of fixed assets, intangible assets and other long-term assets 5,310,913.00 17,933,778.78

Cash paid on investments 1,147,500,000.00 Cash paid relating to other investing activities 39,500,000.00

Subtotal of cash outflows from investing activities 5,310,913.00 1,204,933,778.78

Net cash flows from investing activities 1,109,821,044.21 -1,149,198,778.78


X Financial Report


III. Cash flows from financing activities: Cash received from investments 226,860,000.00 Cash received from borrowings 9,807,671,284.37 6,360,366,283.77 Cash received relating to other financing activities 794,457,000.00 1,997,263,889.00

Subtotal of cash inflows from financing activities 10,828,988,284.37 8,357,630,172.77

Cash repayments of amounts borrowed 9,591,880,585.58 5,237,801,785.71 Cash paid for dividend and profit distribution

or interest payment 327,204,654.73 774,396,836.69 Cash paid relating to other financing activities 2,963,023,405.21 5,593,391,883.99

Subtotal of cash outflows from financing activities 12,882,108,645.52 11,605,590,506.39

Net cash flows from financing activities -2,053,120,361.15 -3,247,960,333.62

IV. Effect of foreign exchange rate changes on cash and cash equivalents 86,290.34 14,127.62

V. Net increase in cash and cash equivalents 965,436,654.26 -357,574,942.80Plus: Balance of cash and cash equivalents as at the

beginning of the period 136,328,721.71 607,805,063.02

VI. Balance of cash and cash equivalents as at the end of the period 1,101,765,375.97 250,230,120.22



6. Cash flow statement of the Company (Cont’d)


X Financial ReportII.

F

inan

cial

Sta

tem

ents

(Con

t’ d)

7.

Co

nso

lidat

ed s

tate

men

t o

f ch

ang

es in

ow

ners

’ eq

uity

Am

ount

for

the

rep

ortin

g p

erio

d

Uni

t: R

MB

Item

Janu

ary to

June

2020

Equit

y attri

butab

le to

owne

rs of

the Co

mpan

y

Othe

r equ

ity in

strum

ents

Share

capit

al

Prefer

ence

share

s

Perpe

tual

bond

sOt

hers

Capit

al

reserv

es

Less:

Treas

ury sh

ares

Othe

r

comp

rehen

sive

incom

e

Spec

ial

reserv

es

Surpl

us

reserv

es

Gene

ral ris

k

provis

ions

Retai

ned p

rofit

Othe

rsSu

btotal

Mino

rity

intere

st

Total

owne

rs’ eq

uity

I. Ba

lance

as at

the e

nd of

the p

rior y

ear

2,904

,608,2

00.00

4,477

,500,0

00.00

2,988

,000,0

00.00

5,086

,686,4

27.30

-879,4

52,13

5.10

1,212

,009,1

09.97

74,12

2,644

.209,3

06,26

9,617

.3825

,169,7

43,86

3.75

1,170

,029,0

16.80

26,33

9,772

,880.5

5

II. Ba

lance

as at

the b

eginn

ing of

the y

ear

2,904

,608,2

00.00

4,477

,500,0

00.00

2,988

,000,0

00.00

–5,0

86,68

6,427

.30–

-879,4

52,13

5.10

–1,2

12,00

9,109

.9774

,122,6

44.20

9,306

,269,6

17.38

–25

,169,7

43,86

3.75

1,170

,029,0

16.80

26,33

9,772

,880.5

5

III. Ch

ange

s in th

e peri

od (“ -

” den

otes d

ecrea

se)79

,600,0

00.00

––

–17

7,314

,104.0

022

6,860

,000.0

0-10

0,282

,332.3

1–

––

-191,8

82,96

3.68

–-26

2,111

,191.9

917

3,949

,146.5

9-88

,162,0

45.40

(I) To

tal co

mpreh

ensiv

e inco

me-10

0,282

,332.3

151

6,326

,703.4

841

6,044

,371.1

714

5,414

,146.5

956

1,458

,517.7

6

(II) Ca

pital p

aid in

and r

educ

ed by

owne

rs79

,600,0

00.00

177,3

14,10

4.00

226,8

60,00

0.00

––

––

––

30,05

4,104

.00 36

,910,0

00.00

66

,964,1

04.00

1. Or

dinary

share

s paid

by sh

areho

lders

79,60

0,000

.0017

7,314

,104.0

025

6,914

,104.0

0 36

,910,0

00.00

29

3,824

,104.0

0

2. Am

ount

of sha

re-ba

sed pa

ymen

ts

rec

ognis

ed in

owne

rs’ eq

uity

226,8

60,00

0.00

-226,8

60,00

0.00

-226,8

60,00

0.00

(III) Pr

ofit d

istribu

tion

-708,2

09,66

7.16

-708,2

09,66

7.16

-8,37

5,000

.00-71

6,584

,667.1

6

1. Dis

tributi

on to

owne

rs (or

share

holde

rs)-70

8,209

,667.1

6-70

8,209

,667.1

6-8,

375,0

00.00

-716,5

84,66

7.16

IV. Ba

lance

as at

the e

nd of

the p

eriod

2,984

,208,2

00.00

4,477

,500,0

00.00

2,988

,000,0

00.00

–5,2

64,00

0,531

.3022

6,860

,000.0

0-97

9,734

,467.4

1–

1,212

,009,1

09.97

74,12

2,644

.209,1

14,38

6,653

.70–

24,90

7,632

,671.7

61,3

43,97

8,163

.3926

,251,6

10,83

5.15



F

inan

cial

Sta

tem

ents

(Con

t’ d)

7.

Co

nso

lidat

ed s

tate

men

t o

f ch

ang

es in

ow

ners

’ eq

uity

(Con

t’ d)

Am

ount

s fo

r th

e p

rior

per

iod

Uni

t: R

MB

Item

Janu

ary to

June

2019

Equit

y attri

butab

le to

owne

rs of

the Co

mpan

y

Othe

r equ

ity in

strum

ents

Share

capit

al

Prefer

ence

share

s

Perpe

tual

bond

sOt

hers

Capit

al

reserv

es

Less:

Treas

ury sh

ares

Othe

r

comp

rehen

sive

incom

e

Spec

ial

reserv

es

Surpl

us

reserv

es

Gene

ral ris

k

provis

ions

Retai

ned p

rofit

Othe

rsSu

btotal

Mino

rity

intere

st

Total

owne

rs’ eq

uity

I. Ba

lance

as at

the e

nd of

the p

rior y

ear

2,904

,608,2

00.00

4,477

,500,0

00.00

2,988

,000,0

00.00

5,091

,449,9

15.14

-736,5

20,18

1.01

3,257

,998.4

71,1

48,88

8,912

.1164

,123,9

19.23

9,107

,422,6

90.85

25,04

8,731

,454.7

982

2,959

,773.3

025

,871,6

91,22

8.09

II. Ba

lance

as at

the b

eginn

ing of

the y

ear

2,904

,608,2

00.00

4,477

,500,0

00.00

2,988

,000,0

00.00

–5,0

91,44

9,915

.14–

-736,5

20,18

1.01

3,257

,998.4

71,1

48,88

8,912

.1164

,123,9

19.23

9,107

,422,6

90.85

–25

,048,7

31,45

4.79

822,9

59,77

3.30

25,87

1,691

,228.0

9

III. Ch

ange

s in th

e peri

od (“ -

” den

otes d

ecrea

se)–

––

–-4,

763,4

87.84

–-14

2,931

,954.0

9-3,

257,9

98.47

63,12

0,197

.869,9

98,72

4.97

198,8

46,92

6.53

–12

1,012

,408.9

634

7,069

,243.5

046

8,081

,652.4

6

(I) To

tal co

mpreh

ensiv

e inco

me-14

2,931

,954.0

91,6

56,56

6,584

.881,5

13,63

4,630

.7971

,201,9

58.49

1,584

,836,5

89.28

(II) Ca

pital p

aid in

and r

educ

ed by

owne

rs–

––

–-4,

763,4

87.84

––

––

––

–-4,

763,4

87.84

295,1

29,78

5.01

290,3

66,29

7.17

1. Or

dinary

share

s paid

by sh

areho

lders

–43

9,447

,225.7

743

9,447

,225.7

7

2. Ot

hers

-4,76

3,487

.84-4,

763,4

87.84

-144,3

17,44

0.76

-149,0

80,92

8.60

(III) Pr

ofit d

istribu

tion

––

––

––

––

63,12

0,197

.869,9

98,72

4.97

-1,45

7,719

,658.3

5–

-1,38

4,600

,735.5

2-19

,262,5

00.00

-1,40

3,863

,235.5

2

1. Tra

nsfer

to sur

plus r

eserve

s63

,120,1

97.86

-63,12

0,197

.86–

–

2. Tra

nsfer

to ge

neral

risk p

rovisio

n9,9

98,72

4.97

-9,99

8,724

.97–

–

3. Dis

tributi

on to

owne

rs (or

share

holde

rs)-1,

384,6

00,73

5.52

-1,38

4,600

,735.5

2-19

,262,5

00.00

-1,40

3,863

,235.5

2

(IV) Tr

ansfe

r of o

wners

’ equ

ity-4,

881,9

91.84

-4,88

1,991

.84-4,

881,9

91.84

1. Ot

hers

-4,88

1,991

.84-4,

881,9

91.84

-4,88

1,991

.84

(V) Sp

ecial

reserv

es1,6

23,99

3.37

1,623

,993.3

71,6

23,99

3.37

1. Ap

propri

ation

1,623

,993.3

71,6

23,99

3.37

1,623

,993.3

7

IV. Ba

lance

as at

the e

nd of

the p

eriod

2,904

,608,2

00.00

4,477

,500,0

00.00

2,988

,000,0

00.00

–5,0

86,68

6,427

.30–

-879,4

52,13

5.10

–1,2

12,00

9,109

.9774

,122,6

44.20

9,306

,269,6

17.38

–25

,169,7

43,86

3.75

1,170

,029,0

16.80

26,33

9,772

,880.5

5

Lega

l Rep

rese

ntat

ive:

Fina

ncia

l con

trol

ler:

Hea

d o

f the

fina

ncia

l dep

artm

ent:

Che

n H

ongg

uoD

ong

Lian

min

gZ

hang

Bo



F

inan

cial

Sta

tem

ents

(Con

t’ d)

8.

Sta

tem

ent

of

chan

ges

in o

wne

rs’ e

qui

ty o

f th

e C

om

pan

y

Am

ount

s fo

r th

e p

erio

d

Uni

t: R

MB

Item

Janu

ary to

June

2020

Othe

r equ

ity in

strum

ents

Share

capit

al

Prefe

rence

share

s

Perpe

tual

bond

sOt

hers

Capit

al

reserv

es

Less

:

Treas

ury sh

ares

Othe

r

comp

rehen

sive

incom

eSp

ecial

rese

rves

Surpl

us re

serve

sRe

taine

d prof

itOt

hers

Total

owne

rs’ eq

uity

I. Ba

lance

as at

the e

nd of

the p

rior y

ear

2,904

,608,2

00.00

4,477

,500,0

00.00

2,988

,000,0

00.00

4,953

,557,4

35.19

1,199

,819,5

28.06

812,6

90,53

4.91

17,33

6,175

,698.1

6

II. Ba

lance

as at

the b

eginn

ing of

the y

ear

2,904

,608,2

00.00

4,477

,500,0

00.00

2,988

,000,0

00.00

–4,9

53,55

7,435

.19–

––

1,199

,819,5

28.06

812,6

90,53

4.91

–17

,336,1

75,69

8.16

III. C

hang

es in

the p

eriod

(“ -” d

enote

s dec

rease

)79

,600,0

00.00

––

–14

6,264

,104.0

022

6,860

,000.0

0–

––

68,93

6,981

.83–

67,94

1,085

.83

(I) To

tal co

mpreh

ensiv

e inc

ome

777,1

46,64

8.99

777,1

46,64

8.99

(II) C

apita

l paid

in an

d red

uced

by ow

ners

79,60

0,000

.00–

––

146,2

64,10

4.00

226,8

60,00

0.00

––

––

–-99

5,896

.00

1. Or

dinary

share

s paid

by sh

areho

lders

79,60

0,000

.0014

6,264

,104.0

022

6,860

,000.0

0-99

5,896

.00

(III) Pr

ofit d

istrib

ution

-708,2

09,66

7.16

–-70

8,209

,667.1

6

1. Dis

tributi

on to

owne

rs (or

share

holde

rs)-70

8,209

,667.1

6-70

8,209

,667.1

6

IV. Ba

lance

as at

the e

nd of

the p

eriod

2,984

,208,2

00.00

4,477

,500,0

00.00

2,988

,000,0

00.00

5,099

,821,5

39.19

226,8

60,00

0.00

1,199

,819,5

28.06

881,6

27,51

6.74

17,40

4,116

,783.9

9



F

inan

cial

Sta

tem

ents

(Con

t’ d)

8.

Sta

tem

ent

of

chan

ges

in o

wne

rs’ e

qui

ty o

f th

e C

om

pan

y (C

ont’ d

)

Am

ount

s fo

r th

e p

rior

per

iod

Uni

t: R

MB

Item

Janu

ary to

June

2019

Othe

r equ

ity in

strum

ents

Share

capit

al

Prefe

rence

share

s

Perpe

tual

bond

sOt

hers

Capit

al

reserv

es

Less

:

Treas

ury sh

ares

Othe

r

comp

rehen

sive

incom

eSp

ecial

rese

rves

Surpl

us re

serve

sRe

taine

d prof

itOt

hers

Total

owne

rs’ eq

uity

I. Ba

lance

as at

the e

nd of

the p

rior y

ear

2,904

,608,2

00.00

4,477

,500,0

00.00

2,988

,000,0

00.00

4,953

,557,4

35.19

1,136

,699,3

30.20

1,629

,209,4

89.72

18,08

9,574

,455.1

1

II. Ba

lance

as at

the b

eginn

ing of

the y

ear

2,904

,608,2

00.00

4,477

,500,0

00.00

2,988

,000,0

00.00

4,953

,557,4

35.19

1,136

,699,3

30.20

1,629

,209,4

89.72

18,08

9,574

,455.1

1

III. C

hang

es in

the p

eriod

(“ -” d

enote

s dec

rease

)63

,120,1

97.86

-816,5

18,95

4.81

-753,3

98,75

6.95

(I) To

tal co

mpreh

ensiv

e inc

ome

631,2

01,97

8.57

631,2

01,97

8.57

(III) Pr

ofit d

istrib

ution

63,12

0,197

.86-1,

447,7

20,93

3.38

-1,38

4,600

,735.5

2

1. Tra

nsfer

to su

rplus

rese

rves

63,12

0,197

.86-63

,120,1

97.86

2. Dis

tributi

on to

owne

rs (or

share

holde

rs)-1,

384,6

00,73

5.52

-1,38

4,600

,735.5

2

IV. Ba

lance

as at

the e

nd of

the p

eriod

2,904

,608,2

00.00

4,477

,500,0

00.00

2,988

,000,0

00.00

4,953

,557,4

35.19

1,199

,819,5

28.06

812,6

90,53

4.91

17,33

6,175

,698.1

6

Lega

l Rep

rese

ntat

ive:

Fina

ncia

l con

trol

ler:

Hea

d o

f the

fina

ncia

l dep

artm

ent:

Che

n H

ongg

uoD

ong

Lian

min

gZ

hang

Bo


X Financial Report

III. General Information of the Company

The predecessor of Shandong Chenming Paper Holdings Limited (hereinafter referred to as the “Company”) was Shandong Shouguang Paper Mill Corporation, which was changed as a joint stock company with limited liability through offering to specific investors in May 1993. In December 1996, with approval by Lu Gai Zi [1996] No. 270) issued by the People’s Government of Shandong Province and Zheng Wei [1996] No. 59 of the Securities Committee of the State Council, the Company was changed as a joint stock company with limited liability established by share offer.

In May 1997, with approval by Zheng Wei Fa [1997] No. 26 issued by the Securities Committee of the State Council, the Company issued 115,000,000 domestic listed foreign shares (B shares) under public offering, which were listed and traded on Shenzhen Stock Exchange from 26 May 1997.

In September 2000, with approval by Zheng Jian Gong Si Zi [2000] No. 151 issued by the China Securities Regulatory Commission, the Company issued an additional 70,000,000 RMB ordinary shares (A shares), which were listed and traded on Shenzhen Stock Exchange from 20 November 2000.

In June 2008, with approval by the Stock Exchange of Hong Kong Limited, the Company issued 355,700,000 H shares. At the same time, 35,570,000 H shares were allocated to the National Council for Social Security Fund by our relevant state-owned shareholder and converted into overseas listed foreign shares (H shares) for the purpose of reducing the number of state-owned shares. The additional H shares issued were listed and traded on Hong Kong Stock Exchange on 18 June 2008.

As at 30 June 2020, the total share capital of the Company was 2,984,608,200 shares. For details, please refer to Note VII. 37.

The Company established a corporate governance structure comprising the general meeting, the board of directors and the supervisory committee, and has human resources department, information technology department, corporate management department, legal affairs department, financial management department, capital management department, securities investment department, procurement department, audit department, and other departments.

The Company and its subsidiaries (hereinafter referred to as the “Group”) are principally engaged in, among other things, processing and sale of paper products (including machine-made paper and paper board), paper making raw materials and machinery; generation and sale of electric power and thermal power; forestry, saplings growing, processing and sale of timber; manufacturing, processing and sale of wood products; and manufacturing and sale of laminated boards and fortified wooden floorboards, hotel service, equipment financial and operating leasing, magnesite mining, processing and sales of talc.

The financial statements and notes thereto were approved by the board of directors of the Company (the “Board”) on 10 August 2020.

Subsidiaries of the Company newly included in the scope of consolidation in the reporting period totalled 2. For details, please refer to Note IX “Equity in other entities”. The scope of consolidation of the Company during the year had 2 companies included and 2 companies excluded. For details, please refer to Note VIII “Changes in the scope of consolidation”.

IV. Basis of Preparation of the Financial Statements

1. Basis of preparation

The Company’s financial statements are prepared on a going concern and based on actual transactions and events, in accordance with the Accounting Standards for Business Enterprises-Basic Standards promulgated by the Ministry of Finance (Order of Ministry of Finance No. 33, as amended by Order of Ministry of Finance No. 76) and 42 specific accounting standards as promulgated and amended on and after 15 February 2006, the application guidelines of the Accounting Standards for Business Enterprises, interpretations and other related rules of the Accounting Standards for Business Enterprises (hereinafter referred to as “ASBEs”), and the disclosure requirements of the “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports” (revised in 2014) of China Securities Regulatory Commission.


X Financial Report

IV. Basis of Preparation of the Financial Statements (Cont’d)

1. Basis of preparation (Cont’d)

The Company’s financial statements have been prepared on an accrual basis in accordance with the ASBEs. Except for certain financial instruments, the financial statements are prepared under the historical cost convention. Held-for-sale non-current assets are measured at the lower of the difference of fair value less expected expenses or the original carrying amount when meeting the conditions of holding for sale. In the event that depreciation of assets occurs, a provision for impairment is made accordingly in accordance with the relevant regulations.

2. Going concern

No facts or circumstances comprise a material uncertainty about the Company’s going concern basis within 12 months since the end of the reporting period.

V. Significant Accounting Policies and Accounting Estimates

Specific accounting policies and accounting estimates are indicated as follows:

The Company and its subsidiaries are principally engaged in machine-made paper, electricity and heat, construction materials, paper making chemical products, financial leasing, hotel management and other operations. The Company and its subsidiaries formulated certain specific accounting policies and accounting estimates for the transactions and matters such as revenue recognition, determination of performance progress and R&D expenses based on their actual production and operation characteristics pursuant to the requirements under the relevant accounting standards for business enterprises. For details, please refer to this Note V. 32 “Revenue”.

1. Statement of compliance with the Accounting Standards for Business Enterprises

These financial statements have been prepared in conformity with the ASBEs, which truly and fully reflect the financial position of the consolidated entity and the Company as at 30 June 2020 and relevant information such as the operating results and cash flows of the consolidated entity and the Company for the first half of 2020.

2. Accounting period

The accounting periods of the Company are divided into annual periods and interim periods. Interim periods refer to reporting periods that are shorter than a full accounting year. The accounting year of the Company is from 1 January to 31 December of each calendar year.

3. Operating cycle

Ordinary operating cycle refers to the period from acquisition of assets used for processing by the Company until their realisation in cash or cash equivalents. The operating cycle of the Company lasts for 12 months, and acts as an indicator for classification of liquidity of assets and liabilities.

4. Functional currency

The Company and its domestic subsidiaries recognise RMB as their functional currency according to the primary economic environment in which they operate. The functional currency of the Company and its domestic subsidiaries is Renminbi (“RMB”). Overseas subsidiaries of the Company recognise U.S. dollar (“USD” or “US$”), Japanese yen (“JPY”), Euro (“EUR”) and South Korean Won (“KRW”) as their respective functional currency according to the general economic environment in which these subsidiaries operate. The Company prepares its financial statements in RMB.


X Financial Report

V. Significant Accounting Policies and Accounting Estimates (Cont’d)

5. Accounting treatment of business combinations under common control and not under common control

Business combinations refer to the transactions or events in which two or more separate enterprises merged as a single reporting entity. Business combinations are divided into business combinations under common control and not under common control.

(1) Business combination under common control

A business combination involving enterprises under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or parties before and after the combination, and that control is not transitory. The party that, on the combination date, obtains control of another enterprise participating in the combination is the absorbing party, while that other enterprise participating in the combination is a party being absorbed. The combination date is the date on which the absorbing party effectively obtains control of the party being absorbed.

Assets and liabilities obtained by the absorbing party are measured at their carrying amount at the combination date as recorded by the party being merged. The difference between the carrying amount of the net assets obtained and the carrying amount of the consideration paid for the combination (or the aggregate nominal value of shares issued as consideration) is charged to the capital reserve (share capital premium). If the capital reserve (share capital premium) is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings.

Cost incurred by the absorbing party that is directly attributable to the business combination shall be charged to profit or loss in the period in which they are incurred.

(2) Business combination not under common control

A business combination not involving enterprises under common control is a business combination in which all of the combining enterprises are not ultimately controlled by the same party or parties before and after the combination. For a business combination not involving enterprises under common control, the party that, on the acquisition date, obtains control of another enterprise participating in the combination is the acquirer, while that other enterprise participating in the combination is the acquiree. The acquisition date is the date on which the acquirer effectively obtains control of the acquiree.

For business combination involving entities not under common control, the cost of a business combination is the aggregate of the fair values, on the date of acquisition, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer to be paid by the acquirer, in exchange for control of the acquire plus agency fee such as audit, legal service and evaluation consultation and other management fees charged to the profit or loss for the period when incurred. Transaction cost attributable to equity or debt securities issued by the acquirer as consideration is included in the initial costs. Contingent consideration involved is charged to the combination cost at its fair value on the acquisition date, in the event that adjustment on the contingent consideration is required as a result of new or additional evidence in relation to circumstances existed on the acquisition date emerges within 12 months from the acquisition date, the combination goodwill shall also be adjusted. The combination cost incurred by the acquirer and the identifiable net assets acquired from the combination are measured at their fair values on the acquisition date. Where the cost of a business combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net assets on the acquisition date, the difference is recognised as goodwill. Where the cost of a business combination is less than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the acquirer shall first reassess the measurement of the fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities and the measurement of the cost of combination. If after such reassessment the cost of combination is still less than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference is charged to profit or loss for the period.


X Financial Report


5. Accounting treatment of business combinations under common control and not under common control (Cont’d)

(2) Business combination not under common control (Cont’d)

In relation to the deductible temporary difference acquired from the acquiree, which was not recognised as deferred tax assets due to non-fulfilment of the recognition criteria at the date of the acquisition, if new or further information that is obtained within 12 months after the acquisition date indicates that related conditions at the acquisition date already existed, and that the implementation of the economic benefits brought by the deductible temporary difference of the acquiree can be expected, the relevant deferred tax assets shall be recognised and goodwill shall be deducted. When the amount of goodwill is less than the deferred tax assets that shall be recognised, the difference shall be recognised in the profit or loss of the period. Except for the above circumstances, deferred tax assets in relation to business combination are recognised in the profit or loss of the period.

For combination of business not under common control achieved by several transactions, these several transactions will be judged whether they belong to “transactions in a basket” in accordance with the judgement standards on “transactions in a basket” as set out in the Notice of the Ministry of Finance on Issuing Accounting Standards for Business Enterprises Interpretation No. 5 (Cai Kuai [2012] No. 19) and Rule of 51 to “Accounting Standard for Business Enterprises No. 33 – Consolidated Financial Statements”. If they belong to “transactions in a basket”, they are accounted for with reference to the descriptions as set out in the previous paragraphs of this section and Note V. 17 “Long-term equity investments”, and if they do not belong to “transactions in a basket”, they are accounted for in separate financial statements and consolidated financial reports:

In separate financial statements, the initial equity investment cost is the aggregate of the carrying amount of the equity investment in the acquiree held prior to the acquisition date and the investment cost newly added as at the acquisition date. In respect of any other comprehensive income attributable to the equity interest in the acquiree prior to the acquisition date, other comprehensive income is accounted for on the same accounting treatment as direct disposal of relevant asset or liability by the acquiree at the time of disposal (i.e. to be transferred to investment income for the period, except for the changes arising from remeasuring net assets or net liabilities of defined benefit plan using the equity method attributable to the acquiree).

In consolidated financial statements, the equity interest in the acquiree held prior to the acquisition date is remeasured at fair value as at the acquisition date, and the difference between the fair value and the carrying amount is recognised as investment income for the current period. In respect of any other comprehensive income attributable to the equity interest in the acquiree held prior to the acquisition date, other comprehensive income is accounted for on the same accounting treatment as direct disposal of relevant asset or liability by the acquiree (i.e. to be transferred to investment income at the acquisition date, except for the changes arising from remeasuring net assets or net liabilities of defined benefit plan using the equity method attributable to the acquiree) is transferred to investment income in the period of the acquisition date.


X Financial Report


6. Preparation of consolidated financial statements

(1) Scope of consolidation

The scope of consolidation of the consolidated financial statements is determined on the basis of control. The term “control” refers to the fact that the Company has power over the investee and is entitled to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of those returns. A subsidiary is an entity controlled by the Company (including an enterprise, a separable part of an investee, a structured entity, etc.).

(2) Basis for preparation of the consolidated financial statements

The consolidated financial statements are prepared by the Company based on the financial statements of the Company and its subsidiaries and other relevant information. In preparing the consolidated financial statements, the accounting policies and accounting periods of the Company and its subsidiaries shall be consistent, and intra-company significant transactions and balances are eliminated.

A subsidiary and its business acquired through a business combination involving entities under common control during the reporting period shall be included in the scope of the consolidation of the Company from the date of being controlled by the ultimate controlling party, and its operating results and cash flows from the date of being controlled by the ultimate controlling party are included in the consolidated income statement and the consolidated cash flow statement, respectively.

For a subsidiary and its business acquired through a business combination involving entities not under common control during the reporting period, its income, expenses and profits are included in the consolidated income statement, and cash flows are included in the consolidated cash flow statement from the acquisition date to the end of the reporting period.

The shareholders’ equity of the subsidiaries that is not attributable to the Company is presented under shareholders’ equity in the consolidated balance sheet as minority interest. The portion of net profit or loss of subsidiaries for the period attributable to minority interest is presented in the consolidated income statement under the “profit or loss of minority interest”. When the amount of loss attributable to the minority shareholders of a subsidiary exceeds the minority shareholders’ portion of the opening balance of owners’ equity of the subsidiary, the excess amount shall be allocated against minority interest.

(3) Accounting treatment for loss of control over subsidiaries

For the loss of control over a subsidiary due to disposal of a portion of the equity investment or other reasons, the remaining equity is measured at fair value on the date when the control is lost. The difference arising from the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest over the sun of the share of the carrying amount of net assets of the former subsidiary calculated continuously from the purchase date based on the shareholding percentage before disposal and the goodwill is recognised as investment income in the period when the control is lost.

Other comprehensive income related to equity investment in the former subsidiary shall be transferred to current profit or loss at the time when the control is lost, except for other comprehensive income arising from changes in net assets or net liabilities due to remeasurement of defined benefit plan by the investee.


X Financial Report


7. Classification of joint arrangements and accounting treatment for joint ventures

A joint arrangement refers to an arrangement of two or more parties have joint control. The joint arrangements of the Group comprise joint operations and joint ventures.

(1) Joint operations

Joint operations refer to a joint arrangement during which the Group is entitled to relevant assets and obligations of this arrangement.

The Group recognises the following items in relation to its interest in a joint operation and accounts for them in accordance with the relevant ASBEs:

A. the assets held solely by it and assets held jointly according to its share;

B. the liabilities assumed solely by it and liabilities assumed jointly according to its share;

C. the revenue from sale of output from joint operations;

D. the revenue from sale of output from joint operations according to its share;

E. the fees solely incurred by it and fees incurred from joint operations according to its share.

(2) Joint ventures

Joint ventures refer to a joint arrangement during which the Company only is entitled to net assets of this arrangement.

The Group accounts for its investments in joint ventures in accordance with the requirements relating to accounting treatment using equity method for long-term equity investments.

8. Standards for recognising cash and cash equivalents

Cash refers to cash on hand and deposits readily available for payment purpose. Cash equivalents refer to short-term and highly liquid investments held by the Group which are readily convertible into known amount of cash and which are subject to insignificant risk of value change.

9. Foreign currency operations and translation of statements denominated in foreign currency

(1) Foreign currency operations

The foreign currency operations of the Group are translated into the functional currency at the prevailing spot exchange rate on the date of exchange, i.e. usually the middle price of RMB exchange rate published by the People’s Bank of China on that date in general and the same hereinafter.

On the balance sheet date, foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. The exchange difference arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate upon initial recognition or the last balance sheet date will be recognised in profit or loss for the period. The foreign currency non-monetary items measured at historical cost shall still be measured by the functional currency translated at the spot exchange rate on the date of the transaction. Foreign currency non-monetary items measured at fair value are translated at the spot exchange rate on the date of determination of the fair value. The difference between the amounts of the functional currency before and after the translation will be recognised in profit or loss for the period.


X Financial Report


9. Foreign currency operations and translation of statements denominated in foreign currency (Cont’d)

(2) Translation of financial statements denominated in foreign currency

When translating the financial statements denominated in foreign currency of overseas subsidiaries, assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date; owner’s equity items except for “retained profit” are translated at the spot exchange rates at the dates on which such items arose.

Income and expenses items in the income statement are translated at the average exchange rate for the period in which the transaction occurred.

All items in the cash flow statements shall be translated at the average exchange rate for the period in which the cash flow transaction occurred. Effects arising from changes of exchange rate on cash shall be presented separately as the “effect of foreign exchange rate changes on cash and cash equivalents” item in the cash flow statements.

The differences arising from translation of financial statements shall be included in the “other comprehensive income” item in owners’ equity in the balance sheet.

On disposal of foreign operations and loss of control, exchange differences arising from the translation of financial statements denominated in foreign currencies related to the disposed foreign operations which has been included in owners’ equity in the balance sheet, shall be transferred to profit or loss in whole or in proportionate share in the period in which the disposal took place.

10. Financial instruments

A financial instrument is a contract that gives rise to a financial asset of one party and a financial liability or equity instrument of another party.

(1) Recognition and derecognition of financial instruments

Financial asset or financial liability will be recognised when the Group became one of the parties under a financial instrument contract.

Financial asset that satisfied any of the following criteria shall be derecognised:

① the contract right to receive the cash flows of the financial asset has terminated;

② the financial asset has been transferred and meets the derecognition criteria for the transfer of financial asset as described below.

A financial liability (or a part thereof) is derecognised only when the present obligation is discharged in full or in part. If an agreement is entered between the Group (debtor) and a creditor to replace the existing financial liabilities with new financial liabilities, and the contractual terms of the new financial liabilities are substantially different from those of the existing financial liabilities, the existing financial liabilities shall be derecognised and the new financial liabilities shall be recognised.

Conventionally traded financial assets shall be recognised and derecognised at the trading date.


X Financial Report


10. Financial instruments (Cont’d)

(2) Classification and measurement of financial assets

The Group classifies the financial assets according to the business model for managing the financial assets and characteristics of the contractual cash flows as follows: financial assets measured at amortised cost, financial assets measured at fair value through other comprehensive income, and financial assets measured at fair value through profit or loss.

Financial assets measured at amortised cost

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated at fair value through other comprehensive income:

The Group’s business model for managing such financial assets is to collect contractual cash flows;

The contractual terms of the financial asset stipulate that cash flows generated on specific dates are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, such financial assets are measured at amortised cost using the effective interest method. A gain or loss on a financial asset that is measured at amortised cost and is not part of a hedging relationship shall be recognised in profit or loss for the current period when the financial asset is derecognised, amortised using the effective interest method or with impairment recognised.

Financial assets measured at fair value through other comprehensive income

A financial asset is classified as measured at fair value through other comprehensive income if it meets both of the following conditions and is not designated at fair value through profit or loss:

The Group’s business model for managing such financial assets is achieved both by collecting collect contractual cash flows and selling such financial assets;

The contractual terms of the financial asset stipulate that cash flows generated on specific dates are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, such financial assets are subsequently measured at fair value. Interest calculated using the effective interest method, impairment losses or gains and foreign exchange gains and losses are recognised in profit or loss for the current period, and other gains or losses are recognised in other comprehensive income. On derecognition, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from other comprehensive income to profit or loss.


X Financial Report



(2) Classification and measurement of financial assets (Cont’d)

Financial assets measured at fair value through profit or loss

The Group classifies the financial assets other than those measured at amortised cost and measured at fair value through other comprehensive income as financial assets measured at fair value through profit or loss. Upon initial recognition, the Group irrevocably designates certain financial assets that are required to be measured at amortised cost or at fair value through other comprehensive income as financial assets measured at fair value through profit or loss in order to eliminate or significantly reduce accounting mismatch.

Upon initial recognition, such financial assets are measured at fair value. Except for those held for hedging purposes, gains or losses (including interests and dividend income) arising from such financial assets are recognised in the profit or loss for the current period.

The business model for managing financial assets refers to how the Group manages its financial assets in order to generate cash flows. That is, the Group’s business model determines whether cash flows will result from collecting contractual cash flows, selling financial assets or both. The Group determines the business model for managing financial assets on the basis of objective facts and specific business objectives for managing financial assets determined by key management personnel.

The Group assesses the characteristics of the contractual cash flows of financial assets to determine whether the contractual cash flows generated by the relevant financial assets on a specific date are solely payments of principal and interest on the principal amount outstanding. The principal refers to the fair value of the financial assets at the initial recognition. Interest includes consideration for the time value of money, for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks, costs and profits. In addition, the Group evaluates the contractual terms that may result in a change in the time distribution or amount of contractual cash flows from a financial asset to determine whether it meets the requirements of the above contractual cash flow characteristics.

All affected financial assets are reclassified on the first day of the first reporting period following the change in the business model where the Group changes its business model for managing financial assets; otherwise, financial assets shall not be reclassified after initial recognition.

Financial assets other than accounts receivable without a significant financing component are measured at fair value upon initial recognition. For financial assets measured at fair value through profit or loss, relevant transaction costs are directly recognised in profit or loss for the current period. For other categories of financial assets, relevant transaction costs are included in the amount initially recognised. Accounts receivable without significant financing component are initially recognised based on the transaction price expected to be entitled by the Group.


X Financial Report



(3) Classification and measurement of financial liabilities

At initial recognition, financial liabilities of the Group are classified as financial liabilities measured at fair value through profit or loss and financial liabilities measured at amortised cost. For financial liabilities not classified as measured at fair value through profit or loss, relevant transaction costs are included in the amount initially recognised.

Financial liabilities measured at fair value through profit or loss

Financial liabilities measured at fair value through profit or loss comprise held-for-trading financial liabilities and financial liabilities designated at fair value through profit or loss upon initial recognition. Such financial liabilities are subsequently measured at fair value, and the gains or losses from the change in fair value and the dividend or interest expenses related to the financial liabilities are included in the profit or loss of the current period.

Financial liabilities measured at amortised cost

Other financial liabilities are subsequently measured at amortised cost using the effective interest rate method, and the gains or losses arising from derecognition or amortisation are recognised in profit or loss for the current period.

Classification between financial liabilities and equity instruments

A financial liability is a liability if:

① it has a contractual obligation to pay in cash or other financial assets to other parties.

② it has a contractual obligation to exchange financial assets or financial liabilities under potential adverse condition with other parties.

③ it is a non-derivative instrument contract which will or may be settled with the entity’s own equity instruments, and the entity will deliver a variable number of its own equity instruments according to such contract.

④ it is a derivative instrument contract which will or may be settled with the entity’s own equity instruments, except for a derivative instrument contract that exchanges a fixed amount of cash or other financial asset with a fixed number of its own equity instruments.

Equity instruments are any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

If the Group cannot unconditionally avoid the performance of a contractual obligation by paying cash or delivering other financial assets, the contractual obligation meets the definition of financial liabilities.

Where a financial instrument must or may be settled with the Group’s own equity instruments, the Group’s own equity instruments used to settle such instrument should be considered as to whether it is as a substitute for cash or other financial assets or for the purpose of enabling the holder of the instrument to be entitled to the remaining interest in the assets of the issuer after deducting all of its liabilities. For the former, it is a financial liability of the Group; for the latter, it is the Group’s own equity instruments.


X Financial Report



(4) Derivative financial instruments

The Group’s derivative financial instruments are mainly forward foreign exchange contracts, which are initially recognised at fair value on the date a derivative contract is entered into and are subsequently measured at their fair value. A derivative financial instrument is recognised as an asset when the fair value is positive and as a liability when the fair value is negative. Any gain or loss arising from changes in fair value and not complying with the accounting requirements on hedging shall be recognised in profit or loss for current period.

(5) Fair value of financial instruments

The methods for determining the fair value of the financial assets or financial liabilities are set out in Note V. 10.

(6) Impairment of financial assets

The Group makes provision for impairment based on expected credit losses (ECLs) on the following items:

Financial assets measured at amortised cost;

Debt investments measured at fair value through other comprehensive income;

Measurement of ECLs

ECLs are the weighted average of credit losses of financial instruments weighted by the risk of default. Credit losses refer to the difference between all contractual cash flows receivable according to the contract and discounted according to the original effective interest rate and all cash flows expected to be received, i.e. the present value of all cash shortages.

The Group takes into account reasonable and well-founded information such as past events, current conditions and forecasts of future economic conditions, and calculates the probability-weighted amount of the present value of the difference between the cash flows receivable from the contract and the cash flows expected to be received weighted by the risk of default.

The Group measures ECLs of financial instruments at different stages. If the credit risk of the financial instrument did not increase significantly upon initial recognition, it is at the first stage, and the Group makes provision for impairment based on the ECLs within the next 12 months; if the credit risk of a financial instrument increased significantly upon initial recognition but has not yet incurred credit impairment, it is at the second stage, and the Group makes provision for impairment based on the lifetime ECLs of the instrument; if the financial instrument incurred credit impairment upon initial recognition, it is at the third stage, and the Group makes provision for impairment based on the lifetime ECLs of the instrument.

For financial instruments with low credit risk on the balance sheet date, the Group assumes that the credit risk did not increase significantly upon initial recognition, and makes provision for impairment based on the ECLs within the next 12 months.


X Financial Report



(6) Impairment of financial assets (Cont’d)

Measurement of ECLs (Cont’d)

Lifetime ECLs represent the ECLs resulting from all possible default events over the expected life of a financial instrument. The 12-month ECLs are the ECLs resulting from possible default events on a financial instrument within 12 months (or a shorter period if the expected life of the financial instrument is less than 12 months) after the balance sheet date, and is a portion of lifetime ECLs.

The maximum period to be considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk, including renewal options.

For the financial instruments at the first and second stages and with low credit risks, the Group calculates the interest income based on the book balance and the effective interest rate before deducting the impairment provisions. For financial instruments at the third stage, interest income is calculated based on the amortised cost after deducting impairment provisions made from the book balance and the effective interest rate.

For bills receivable, accounts receivable and contract assets, regardless of whether there is a significant financing component, the Group always makes provision for impairment at an amount equal to lifetime ECLs.

When the Group is unable to assess the information of ECLs for an individual financial asset at a reasonable cost, it classifies bills receivable and accounts receivable into portfolios based on the credit risk characteristics, and calculates the ECLs on a portfolio basis. The basis for determining the portfolios is as follows:

A. Bills receivable

Bills receivable portfolio 1: Bank acceptance bills

Bills receivable portfolio 2: Commercial acceptance bills

B. Accounts receivable

Accounts receivable portfolio 1: Factoring receivables

Accounts receivable portfolio 2: Receivables from non-related party customers

Accounts receivable portfolio 3: Due from related party customers

For bills receivable classified as a portfolio, the Group refers to the historical credit loss experience, combined with the current situation and the forecast of future economic conditions, to calculate the ECLs based on default risk exposure and lifetime ECL rate.

For accounts receivable classified as a portfolio, the Group refers to the historical credit loss experience, combined with the current situation and the forecast of future economic conditions, to prepare a comparison table of the ageing/overdue days of accounts receivable and the lifetime ECL rate to calculate the ECLs.


X Financial Report




Other receivables

The Group classifies other receivables into portfolios based on credit risk characteristics, and calculates the ECLs on a portfolio basis. The basis for determining the portfolios is as follows:

Other receivables portfolio 1: Amount due from government authorities

Other receivables portfolio 2: Amount due from related parties

Other receivables portfolio 3: Other receivables

For other receivables classified as a portfolio, the Group calculates the ECLs based on default risk exposure and the ECL rate over the next 12 months or the entire lifetime.

Long-term receivables

The Group’s long-term receivables include finance lease receivables and deposits receivable.

The Group classifies the finance lease receivables, deposits receivable and other receivables into portfolios based on the credit risk characteristics, and calculates the ECLs on a portfolio basis. The basis for determining the portfolios is as follows:

A. Finance lease receivables

Finance lease receivables portfolio 1: Receivables not past due

Finance lease receivables portfolio 2: Overdue receivables

B. Other long-term receivables

Other long-term receivables portfolio 1: Deposits receivable

Other long-term receivables portfolio 2: Other receivables

For deposits receivable and other receivables, the Group refers to the historical credit loss experience, combined with the current situation and the forecast of future economic conditions, and calculates the ECLs based on default risk exposure and lifetime ECL rate.

Except for those of finance lease receivables and deposits receivable, the ECLs of other receivables and long-term receivables classified as a portfolio are measured based on default risk exposure and ECL rate over the next 12 months or the entire lifetime.

Debt investments and other debt investments

For debt investments and other debt investments, the Group measures the ECLs based on the nature of the investment, the types of counterparty and risk exposure, and default risk exposure and ECL rate within the next 12 months or the entire lifetime.


X Financial Report




Assessment of significant increase in credit risk

In assessing whether the credit risk of a financial instrument has increased significantly upon initial recognition, the Group compares the risk of default of the financial instrument at the balance sheet date with that at the date of initial recognition to determine the relative change in risk of default within the expected lifetime of the financial instrument.

In determining whether the credit risk has increased significantly upon initial recognition, the Group considers reasonable and well-founded information, including forward-looking information, which can be obtained without unnecessary extra costs or efforts. Information considered by the Group includes:

The debtor’s failure to make payments of principal and interest on their contractually due dates;

An actual or expected significant deterioration in a financial instrument’s external or internal credit rating (if any);

An actual or expected significant deterioration in the operating results of the debtor;

Existing or expected changes in the technological, market, economic or legal environment that have a significant adverse effect on the debtor’s ability to meet its obligation to the Group.

Depending on the nature of the financial instruments, the Group assesses whether there has been a significant increase in credit risk on either an individual basis or a collective basis. When the assessment is performed on a collective basis, the financial instruments are grouped based on their common credit risk characteristics, such as past due information and credit risk ratings.

The Group determines that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

Credit-impaired financial assets

At balance sheet date, the Group assesses whether financial assets measured at amortised cost and debt investments measured at fair value through other comprehensive income are credit-impaired. A financial asset is credit-impaired when one or more events that have an adverse effect on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable events:

Significant financial difficulty of the issuer or debtor;

A breach of contract by the debtor, such as a default or delinquency in interest or principal payments;

For economic or contractual reasons relating to the debtor’s financial difficulty, the Group having granted to the debtor a concession that would not otherwise consider;

It becoming probable that the debtor will enter bankruptcy or other financial reorganisation;

The disappearance of an active market for that financial asset because of financial difficulties of the issuer or debtor.


X Financial Report




Presentation of provisions for ECLs

ECLs are remeasured at each balance sheet date to reflect changes in the financial instrument’s credit risk upon initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss for the current period. For financial assets measured at amortised cost, the provisions of impairment is deducted from the carrying amount of the financial assets presented in the balance sheet; for debt investments at fair value through other comprehensive income, the Group makes provisions of impairment in other comprehensive income without reducing the carrying amount of the financial asset.

Write-offs

The book balance of a financial asset is directly written off to the extent that there is no realistic prospect of recovery of the contractual cash flows of the financial asset (either partially or in full). Such write-off constitutes derecognition of such financial asset. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

If a write-off of financial assets is later recovered, the recovery is credited to profit or loss in the period in which the recovery occurs.

(7) Transfer of financial assets

Transfer of financial assets refers to the transfer or delivery of financial assets to another party other than the issuer of such financial assets (the transferee).

If the Group transfers substantially all the risks and rewards of ownership of the financial asset to the transferee, the financial asset shall be derecognised. If the Group retains substantially all the risks and rewards of ownership of a financial asset, the financial asset shall not be derecognised.

If the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, it accounts for the transaction as follows: if the Group does not retain control, it derecognises the financial asset and recognises any resulting assets or liabilities; if the control over the financial asset is not waived, the relevant financial asset is recognised according to the extent of its continuing involvement in the transferred financial asset and the relevant liability is recognised accordingly.

(8) Offset of financial assets and financial liabilities

If the Group owns the legitimate rights of offsetting the recognised financial assets and financial liabilities, which are enforceable currently, and the Group plans to realise the financial assets or to clear off the financial liabilities on a net amount basis or simultaneously, the net amount of financial assets and financial liabilities shall be presented in the balance sheet upon offsetting. Otherwise, financial assets and financial liabilities are presented separately in the balance sheet without offsetting.


X Financial Report


11. Bills receivable

Method for determining the ECLs of bills receivable

The Company measures the loss provisions for bills receivable in accordance with the ECLs amount for the entire period. Based on the credit risk characteristics of bills receivable, bills receivable are divided into different groups:

Item Basis for determining the groups

Bank acceptance bills The acceptance party is a bank with less credit risk

Commercial acceptance bills The acceptance party is a company with higher credit risk

12. Accounts receivable

Method for determining the ECLs of accounts receivable

For receivables and contract assets that do not contain significant financing components, the Company measures loss provisions based on the ECL amount for the entire period.

For receivables, contract assets and lease receivables that contain significant financing components, the Company chooses to always measure the loss provision based on the ECL amount for the entire period.

In addition to accounts receivable and contract assets which are individually assessed for credit risk, they are also classified into different groups based on their credit risk characteristics:


Amount due from related parties This group comprises amounts due from related parties with lower risks.

Factoring receivables This group comprises factoring receivables with special risks.

Amount due from distributor customers

This group comprises receivables with their ageing as credit risk characteristics.


X Financial Report


13. Other receivables

Determination and accounting treatment of ECLs of other receivables

The Company measures impairment losses using the ECL amount in the next 12 months or the entire duration, based on whether the credit risk of other receivables has increased significantly upon initial recognition. In addition to other receivables which are individually assessed for credit risk, they are also classified into different groups based on their credit risk characteristics:


Dividends receivable This group comprises dividends receivable.

Interest receivable This group comprises interest due from financial institutions.

Amount due from government agencies

This group comprises amount due from government agencies with less risks.

Amount due from related parties This group comprises amount due from related parties with less risks.

Other receivables This group comprises for all types of deposits, advances and premiums receivable during daily and recurring activities.

14. Inventories

Whether the Company needs to comply with the disclosure requirements for specific industries

No

(1) Classification of inventories

Inventories of the Group mainly include raw materials, work in progress, goods in stock, development products and consumable biological assets, etc.

(2) Pricing of inventories dispatched

Inventories of the Group are measured at their actual cost when obtained. Cost of raw materials, goods in stock and others will be calculated with weighted average method when being dispatched.

Consumable biological assets refer to biological assets held-for-sale which include growing timber. Consumable biological assets without a stock are stated at historical cost at initial recognition, and subsequently measured at fair value when there is a stock. Changes in fair values shall be recognised as profit or loss in the current period. The cost of self-planting, self-cultivating consumable biological assets is the necessary expenses directly attributable to such assets prior to canopy closure, including borrowing costs eligible for capitalisation. Subsequent expenses such as maintenance cost incurred after canopy closure shall be included in profit or loss for the current period.


X Financial Report


14. Inventories (Cont’d)

(3) Recognition of net realisable value of inventories and provision for inventory impairment

Net realisable value of inventories refers to the amount of the estimated price of inventories less the estimated cost incurred upon completion, estimated sales expenses and taxes and levies. The realisable value of inventories shall be determined on the basis of definite evidence, purpose of holding the inventories and effect of after-balance-sheet-date events.

At the balance sheet date, provision for inventory impairment is made when the cost is higher than the net realisable value. The Group usually make provision for inventory impairment based on categories of inventories. At the balance sheet date, in case the factors causing inventory impairment no longer exists, the original provision for inventory impairment shall be reversed.

(4) Inventory stock taking system

The Group implements permanent inventory system as its inventory stock taking system.

(5) Amortisation of low-value consumables and packaging materials

The low-value consumables of the Group are amortised when issued for use.

Packaging materials for turnover are amortised when issued for use.

15. Held for sale and discontinued operations

(1) Classification and measurement of non-current assets or disposal groups held for sale

A non-current asset or disposal group is classified as held for sale if its carrying amount will be recovered principally through a sale transaction (including a non-monetary asset exchange with commercial substance) rather than through continuing use.

The aforesaid non-current asset does not include the investment property subsequently measured at fair value, the biological assets measured at the net amount of the fair value deducting the sales expense, the assets generated from remuneration, financial assets, deferred income tax assets and rights from insurance contract.

A disposal group is a group of assets to be disposed of together as a whole by sale or other means in a transaction, and liabilities directly associated with those assets that will be transferred in the transaction. In certain circumstances, the disposal group includes the goodwill acquired in the business combination.

A non-current asset or a disposal group is classified as held for sale if it meets all of the following conditions: the non-current asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset or disposal group; the sale is highly probable, i.e. a sale plan has been resolved and a firm purchase commitment has been obtained, and the sale is expected to be completed within one year. When the Group loses control of a subsidiary due to reasons such as disposal of investment in a subsidiary, regardless of whether the Group retains part of the equity investment after the disposal, when the investment in a subsidiary intended to be disposed of meets the conditions for classification as held for sale, the investment in a subsidiary is classified as held for sale as a whole in the separate financial statements, and all assets and liabilities of the subsidiary are classified as held for sale in the consolidated financial statements.


X Financial Report


15. Held for sale and discontinued operations (Cont’d)

(1) Classification and measurement of non-current assets or disposal groups held for sale (Cont’d)

When the non-current assets or disposal groups held for sale are initially measured or remeasured at the balance sheet date, the excess of the carrying amount over the net amount of the fair value less selling expenses is recognised as asset impairment loss. For the amount of impairment loss recognised on disposal groups held for sale, the carrying amount of the goodwill of the disposal group shall be offset against first, and then be offset against the carrying amount of non-current assets according to the proportion of the carrying amount of non-current assets.

If the net amount of the fair value of the non-current assets or disposal groups held for sale less the selling expenses increases on the subsequent balance sheet date, the amount previously written down shall be recovered and reversed in the amount of asset impairment loss recognised after be classified as held for sale, and the reversed amount shall be included in the current profit and loss. The carrying amount of goodwill written off shall not be reversed.

Non-current assets held for sale and assets in disposal group held for sale are not depreciated or amortised. Interest and other expenses of a disposal group classified as held for sale continue to be recognised. For all or part of an investment in an associate or a joint venture that is classified as held for sale, the part of being classified as held for sale shall cease to be accounted for using the equity method, while any retained portion (not classified as held for sale) shall continue to be accounted for using the equity method; The Group ceases to use the equity method from the date when the Group ceases to have significant influence over an associate or a joint venture.

If a non-current asset or disposal group is classified as held for sale but subsequently no longer meets the criteria for being classified as held for sale, the Group shall cease to classify it as held for sale and measure it at the lower of:

① the carrying amount of the asset or disposal group before being classified as held for sale is adjusted by the depreciation, amortisation or impairment that would have been recognised if the asset or disposal group had not been classified as held for sale;

② recoverable amount.

(2) Discontinued operations

A discontinued operation is a component of the Group that either has been disposed of or is classified as held for sale, and can be distinguished separately, and meets one of the following conditions:

① The component represents a separate major line of business or geographical area of operations.

② The component is part of a related plan to dispose of a separate major line of business or geographical area of operations.

③ The component is a subsidiary acquired exclusively with a view to resale.


X Financial Report


15. Held for sale and discontinued operations (Cont’d)

(3) Presentation

The Group presents the non-current assets held for sale or the assets in the disposal group held for sale as “assets held-for-sale” and the liabilities in the disposal group held for sale as “liabilities held-for-sale” in the balance sheet.

The Group presents profit or loss from continuing operations and profit or loss from discontinued operations in the income statement. For non-current assets and disposal groups held for sale that do not meet the definition of discontinued operation, their impairment losses and reversal amounts and gains or losses are presented as profit or loss from continuing operations. Operating profit or loss such as impairment loss and reversal amount of discontinued operation and disposal gain or loss is presented as profit or loss from discontinued operation.

Disposal groups that are intended to be closed for use rather than for sale and meet the conditions for the components in the definition of discontinued operations are presented as discontinued operations from the date of cessation of use.

For the discontinued operations presented in the current period, the information originally presented as profit or loss from continuing operations in the current financial statements is re-presented as profit or loss from discontinued operations in the comparable accounting period. If the discontinued operations no longer meet the conditions for being classified of held-for-sale, the information originally presented as profit or loss from discontinued operations in the current financial statements shall be re-presented as profit or loss from continuing operations in the comparable accounting period.

16. Long-term receivables

The Company measures the impairment loss of long-term receivables at an amount equal to the ECLs in the next 12 months or the lifetime ECLs, depending on whether its credit risk has significantly increased upon initial recognition. Other than the long-term receivables assessed individually for credit risks, long-term receivables are classified into different groups based on their credit risk characteristics:


Long-term receivables not yet past due

This group is comprised of long-term receivables not yet past due with normal exposures.

Long-term receivables overdue This group is comprised of long-term receivables with higher past due exposures.


X Financial Report


17. Long-term equity investments

Long-term equity investments include the equity investments in subsidiaries, joint ventures and associates. Associates of the Group are those investees that the Group imposes significant influence over.

(1) Determination of initial investment cost

Long-term equity investments acquired through business combinations: for a long-term equity investment acquired through a business combination involving enterprises under common control, the investment cost shall be the absorbing party’s share of the carrying amount of the owners’ equity under the consolidated financial statements of the ultimate controlling party on the date of combination. For a long-term equity investment acquired through a business combination involving enterprises not under common control, the investment cost of the long-term equity investment shall be the cost of combination.

Long-term equity investments acquired through other means: for a long-term equity investment acquired by cash payment, the initial investment cost shall be the purchase cost actually paid; for a long-term equity investment acquired by issuing equity securities, the initial investment cost shall be the fair value of equity securities issued.

(2) Subsequent measurement and method for profit or loss recognition

Investments in subsidiaries shall be accounted for using the cost method. Except for the investments which meet the conditions of holding for sale, investments in associates and joint ventures shall be accounted for using the equity method.

For a long-term equity investment accounted for using the cost method, the cash dividends or profits declared by the investees for distribution shall be recognised as investment gains and included in profit or loss for the current period, except the case of receiving the actual consideration paid for the investment or the declared but not yet distributed cash dividends or profits which is included in the consideration.

For a long-term equity investment accounted for using the equity method, where the initial investment cost exceeds the investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date, no adjustment shall be made to the investment cost of the long-term equity investment. Where the initial investment cost is less than the investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date, adjustment shall be made to the carrying amount of the long-term equity investment, and the difference shall be charged to profit or loss for the current period.

Under the equity method, investment gain and other comprehensive income shall be recognised based on the Company’s share of the net profits or losses and other comprehensive income made by the investee, respectively. Meanwhile, the carrying amount of long-term equity investment shall be adjusted. The carrying amount of long-term equity investment shall be reduced based on the Group’s share of profit or cash dividend distributed by the investee. In respect of the other movement of net profit or loss, other comprehensive income and profit distribution of investee, the carrying amount of long-term equity investment shall be adjusted and included in the capital reserves (other capital reserves). The Group shall recognise its share of the investee’s net profits or losses based on the fair values of the investee’s individual separately identifiable assets at the time of acquisition, after making appropriate adjustments thereto according to the accounting policies and accounting periods of the Group.


X Financial Report


17. Long-term equity investments (Cont’d)

(2) Subsequent measurement and method for profit or loss recognition (Cont’d)

For additional equity investment made in order to obtain significant influence or common control over investee without resulted in control, the initial investment cost under the equity method shall be the aggregate of fair value of previously held equity investment and additional investment cost on the date of transfer. The difference between the fair value and carrying amount of previously held equity investment on the date of transfer and the accumulated change in fair value originally included in other comprehensive income shall be recognised in the profit or loss for the current period under the equity method.

In the event of loss of common control or significant influence over investee due to partial disposal of equity investment, the remaining equity interest after disposal shall be accounted for according to the Accounting Standard for Business Enterprises No. 22 – Recognition and measurement of Financial Instruments. The difference between its fair value and carrying amount shall be included in profit or loss for the current period. In respect of other comprehensive income recognised under previous equity investment using equity method, it shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or liability by investee at the time when equity method was ceased to be used. Movement of other owners’ equity related to the previous equity investment shall be transferred to profit or loss for the current period.

In the event of loss of control over investee due to partial disposal of equity investment, the remaining equity interest which can apply common control or impose significant influence over the investee after disposal shall be accounted for using equity method. Such remaining equity interest shall be treated as accounting for using equity method since it is obtained and adjustment was made accordingly. For the remaining equity interest which cannot apply common control or impose significant influence over the investee after disposal, it shall be accounted for using the Accounting Standard for Business Enterprises No. 22 – Recognition and measurement of Financial Instruments. The difference between its fair value and carrying amount as at the date of losing control shall be included in profit or loss for the current period.

If the shareholding ratio of the Company is reduced due to the capital increase of other investors, and as a result, the Company loses the control of but still can apply common control or impose significant influence over the investee, the net asset increase due to the capital increase of the investee attributable to the Company shall be recognised according to the new shareholding ratio, and the difference with the original carrying amount of the long-term equity investment corresponding to the shareholding ratio reduction part that should be carried forward shall be recorded in the profit or loss for the current period; and then it shall be adjusted according to the new shareholding ratio as if equity method is used for accounting when acquiring the investment.

In respect of the transactions between the Group and its associates and joint ventures, the share of unrealised gain or loss arising from internal transactions shall be eliminated by the portion attributable to the Group. Investment gain shall be recognised accordingly. However, any unrealised loss arising from internal transactions between the Group and an investee is not eliminated to the extent that the loss is impairment loss of the transferred assets.

(In case of using accounting policy options, the following disclosure should be added:

The Group’s long-term equity investments in associates and joint ventures, which are held indirectly by venture capital institutions, mutual funds, trust companies or similar entities including investment-linked insurance funds, are measured at fair value and their changes are included in the profit or loss.)


X Financial Report



(3) Basis for determining the common control and significant influence on the investee

Common control is the contractually agreed sharing of control over an arrangement, which relevant activities of such arrangement must be decided by unanimously agreement from parties who share control. When determining if there is any common control, it should first be identified if the arrangement is controlled by all the participants or the group consisting of the participants, and then determined if the decision on the arranged activity can be made only with the unanimous consent of the participants sharing the control. If all the participants or a group of participants can only decide the relevant activities of certain arrangement through concerted action, it can be considered that all the participants or a group of participants share common control on the arrangement. If there are two or more participant groups that can collectively control certain arrangement, it does not constitute common control. When determining if there is any common control, the relevant protection rights will not be taken into account.

Significant influence is the power of the investor to participate in the financial and operating policy decisions of an investee, but to fail to control or joint control the formulation of such policies together with other parties. When determining if there is any significant influence on the investee, the influence of the voting shares of the investee held by the investor directly and indirectly and the potential voting rights held by the investor and other parties which are exercisable in the current period and converted to the equity of the investee, including the warrants, stock options and convertible bonds that are issued by the investee and can be converted in the current period, shall be taken into account.

When the Company holds directly or indirectly through the subsidiary 20% (inclusive) to 50% of the voting shares of the investee, it is generally considered to have significant influence on the investee, unless there is concrete evidence to prove that it cannot participate in the production and operation decision-making of the investee and cannot pose significant influence in this situation. When the Group owns less than 20% of the voting shares of the investee, it is generally considered that it has not significantly influenced on the investee, unless there is concrete evidence to prove that it can participate in the production and operation decision-making of the investee and cannot pose significant influence in this situation.

(4) Method for impairment test and measurement of impairment provision

For the method for making impairment provision for the investment in subsidiaries, associates and joint ventures, please refer to Note V. 25.

18. Investment property

Measurement of investment property

Measured by using the cost method

Investment property refers to real estate held to earn rentals or for capital appreciation, or both. The investment property of the Group includes leased land use rights, land use rights held for sale after appreciation, and leased buildings.

The investment property of the Group is measured initially at cost upon acquisition, and subject to depreciation or amortisation in the relevant periods according to the relevant provisions on fixed assets or intangible assets.

For the method for making impairment provision for the investment property adopted cost method for subsequent measurement, please refer to Note V. 25.

When an investment property is sold, transferred, retired or damaged, the amount of proceeds on disposal of the property net of the carrying amount and related tax and surcharges is recognised in profit or loss for the current period.


X Financial Report


19. Fixed assets

(1) Conditions for recognition of fixed assets

Fixed assets of the Group are tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and have a useful life of more than one accounting year.

Fixed assets are recognised only if the Company is very likely to receive economic benefits from the asset and its cost can be measured reliably.

A fixed asset of the Group shall be initially measured at actual cost when acquired.

(2) Depreciation method of various types of fixed assets

The Group adopts the straight-line method for depreciation. Provision for depreciation will be started when the fixed asset reaches its expected usable state, and stopped when the fixed asset is derecognised or classified as a non-current asset held for sale. Without regard to the depreciation provision, the Group determines the annual depreciation rate of various types of fixed assets by category, estimated useful lives and estimated residual value of the fixed assets, as shown below:

CategoryUseful lives

(Year)

Estimated residual value

(%)

Annual depreciation

rate (%)

Housing and building structure 20-40 5-10 2.25-4.75Machinery and equipment 8-20 5-10 4.50-11.88Transportation equipment 5-8 5-10 11.25-19.00Electronic equipment and others 5 5-10 18.00-19.00

Where, for the fixed assets for which depreciation provision is made, to determine the depreciation rate, the accumulated amount of the fixed asset depreciation provision that has been made shall be deducted.

(3) The impairment test method and impairment provision method of the fixed assets are set out in Note V. 25.

(4) The Group will recheck the useful lives, estimated net residual value and depreciation method of the fixed assets at the end of each year.

When there is any difference between the useful lives estimate and the originally estimated value, the useful lives of the fixed asset shall be adjusted. When there is any difference between the estimated net residual value estimate and the originally estimated value, the estimated net residual value of the fixed asset shall be adjusted.

(5) Overhaul expense

For the overhaul expense incurred by the Group during the regular inspection on the fixed assets, if there is concrete evidence to prove that it meets the fixed asset recognition condition, it shall be included in the cost of fixed asset; if it does not meet the fixed asset recognition condition, it shall be included in the profit or loss for the current period. The depreciation of fixed assets shall be continued in the intervals of the regular overhaul of the fixed asset.


X Financial Report


20. Construction in progress

Construction in progress of the Group is recognised based on the actual construction cost, including all necessary expenditures incurred for construction projects, capitalised borrowing costs for the construction in progress before it has reached the working condition for its intended use, and other related expenses during the construction period.

A construction in progress is reclassified to fixed assets when it has reached the working condition for its intended use.

The method for impairment provision of construction in progress is set out in Note V. 25.

21. Borrowing costs

(1) Recognition principle for the capitalisation of the borrowing costs

The borrowing costs incurred by the Group directly attributable to the acquisition, construction or production of a qualifying asset will be capitalised and included in the cost of relevant asset. Other borrowing costs will be recognised as expenses when incurred according to the incurred amount, and included in the profit or loss for the current period. When the borrowing costs meet all the following conditions, capitalisation shall be started:

① The capital expenditure has been incurred, which includes the expenditure incurred by paying cash, transferring non-cash assets or undertaking interest-bearing liabilities for acquiring, constructing or producing the qualifying assets;

② The borrowing costs have been incurred;

③ The acquisition, construction or production activity necessary for the asset to be ready for its intended use or sale has been started.

(2) Capitalisation period of borrowing costs

When a qualifying asset acquired, constructed or produced by the Group is ready for its intended use or sale, the capitalisation of the borrowing costs shall discontinue. The borrowing costs incurred after a qualifying asset is ready for its intended use or sale shall be recognised as expenses when incurred according to the incurred amount, and included in the profit or loss for the current period.

Capitalisation of borrowing costs shall be suspended during periods in which the acquisition, construction or production of a qualifying asset is interrupted abnormally, when the interruption is for a continuous period of more than 3 months. The capitalisation of the borrowing costs shall be continued in the normal interruption period.

(3) Calculation methods for capitalisation rate and capitalisation amount of the borrowing costs

Where funds are borrowed for a specific purpose, the amount of interest to be capitalised shall be the actual interest expense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used into banks or any investment income on the temporary investment of those funds. Where funds are borrowed for general purpose, the Company shall determine the amount of interest to be capitalised on such borrowings by applying a capitalisation rate to the weighted average of the excess amounts of cumulative expenditures on the asset over and above the amounts of specific-purpose borrowings. The capitalisation rate shall be the weighted average of the interest rates applicable to the general-purpose borrowings.

During the capitalisation period, exchange differences on a specific purpose borrowing denominated in foreign currency shall be capitalised. Exchange differences related to general-purpose borrowings denominated in foreign currency shall be included in profit or loss for the current period.


X Financial Report


22. Biological assets

Consumable biological assets refer to biological assets held-not-for-sale, which include forest trees being grown. Consumable biological assets are stated at cost at initial recognition. The cost of self-planting, self-cultivating, self-breeding or self-farming consumable biological assets is the necessary expenses directly attributable to such assets prior to canopy closure, including borrowing costs eligible for capitalisation. Subsequent expenses such as maintenance incurred after canopy closure shall be included in profit or loss for the current period.

The cost of consumable biological assets shall, at the time of harvest or disposal, be carried forward at carrying amount using the batch averaging method.

On the balance sheet date, consumable biological assets are measured at the lower of cost and net realisable value, and the impairment provision for consumable biological assets is made using the same approach as that used for the recognition of impairment provision for inventories. In case the factors causing impairment no longer exists, the reduced amount shall be recovered and reversed in the provision amount originally provided for impairment. The reversed amount shall be recognised in profit or loss for the current period.

23. Right-of-use assets

(1) Conditions for recognition of right-of-use assets

Right-of-use assets of the Group are defined as the right of underlying assets in the lease term for the Group as a lessee.

Right-of-use assets are initially measured at cost at the commencement date of the lease. The cost includes the amount of the initial measurement of lease liability; lease payments made at or before the inception of the lease less any lease incentives enjoyed; initial direct costs incurred by the Group as lessee; costs to be incurred in dismantling and removing the underlying assets, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease incurred by the Group as lessee. As a lessee, the Group recognises and measures the costs of dismantling and restoration in accordance with the Accounting Standard for Business Enterprises No. 13 – Contingencies. Subsequently, the lease liability is adjusted for any remeasurement of the lease liability.

(2) Depreciation method of right-of-use assets

The Group uses the straight-line method for depreciation. Where the Group, as a lessee, is reasonably certain to obtain ownership of the leased asset at the end of the lease term, such asset is depreciated over the remaining useful life of the leased asset. Where ownership of the lease assets during the lease term cannot be reasonably determined, right-of-use assets are depreciated over the lease term or the remainder of useful lives of the lease assets, whichever is shorter.

(3) For the methods of impairment test and impairment provision of right-of-use assets, please refer to Note V. 25.


X Financial Report


24. Intangible assets

The intangible assets of the Group include land use rights, software and certificates of third party right.

The intangible asset is initially measured at cost, and its useful life is determined upon acquisition. If the useful life is finite, the intangible asset will be amortised over the estimated useful life using the amortisation method that can reflect the estimated realisation of the economic benefits related to the asset, starting from the time when it is available for use. If it is unable to reliably determine the estimated realisation, straight-line method shall be adopted for amortisation. The intangible assets with uncertain useful life will not be amortised.

The amortisation methods for the intangible assets with finite useful life are as follows:

Type Useful life Method of amortisation

Land use rights 50-70 Straight-line methodSoftware 5-10 Straight-line methodCertificates of third party right 3 Straight-line method

The Group reviews the useful life and amortisation method of the intangible assets with finite useful life at the end of each year. If it is different from the previous estimates, the original estimates will be adjusted, and will be treated as a change in accounting estimate.

If it is estimated on the balance sheet date that certain intangible asset can no longer bring future economic benefit to the company, the carrying amount of the intangible asset will be entirely transferred into the profit or loss for the current period.

The impairment method for the intangible assets is set out in Note V. 25.

25. Asset impairment

Impairment of long-term equity investments in subsidiaries, associates and joint ventures, investment property, fixed assets, construction in progress, intangible assets, goodwill and others (excluding inventories, deferred tax assets and financial assets) subsequently measured at cost is determined as follows:

The Group determines if there is any indication of asset impairment as at the balance sheet date. If there is any evidence indicating that an asset may be impaired, recoverable amount shall be estimated for impairment test. Goodwill arising from business combinations, intangible assets with an indefinite useful life and intangible assets not ready for use will be tested for impairment annually, regardless of whether there is any indication of impairment.

The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from the asset. The Group estimates the recoverable amount of an individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group shall determine the recoverable amount of the asset group to which the asset belongs. The determination of an asset group is based on whether major cash inflows generated by the asset group are independent of the cash inflows from other assets or asset groups.


X Financial Report


25. Asset impairment (Cont’d)

When the recoverable amount of an asset or an asset group is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction amount is charged to profit or loss and an impairment provision is made accordingly.

For the purpose of impairment test of goodwill, the carrying amount of goodwill acquired in a business combination is allocated to the relevant asset groups on a reasonable basis from the acquisition date; where it is difficult to allocate to the related asset groups, it is allocated to the combination of related asset groups. The related asset groups or combination of asset groups are those which can benefit from the synergies of the business combination and are not larger than the reportable segments identified by the Group.

In the impairment test, if there is any indication that an asset group or a combination of asset groups related to goodwill may be impaired, the Group first tests the asset group or set of asset groups excluding goodwill for impairment, calculates the recoverable amount and recognises the corresponding impairment loss. An impairment test is then carried out on the asset group or combination of asset groups containing goodwill by comparing its carrying amount with its recoverable amount. If the recoverable amount is lower than the carrying amount, an impairment loss is recognised for goodwill.

An impairment loss recognised shall not be reversed in a subsequent period.

26. Long-term prepaid expenses

The long-term prepaid expenses incurred by the Group shall be recognised based on the actual cost, and evenly amortised over the estimated benefit period. For the long-term prepaid expense that cannot benefit the subsequent accounting periods, its value after amortisation shall be entirely included in the profit or loss for the current period.

27. Contract liabilities

A contract liability represents the Company’s obligation to transfer goods to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If the customer has already paid the contract consideration before the Company transfers goods to the customer or the Company has obtained the unconditional collection right, the Company will recognise such amount received or receivable as contract liabilities at earlier of the actual payment by the customer or the amount payable becoming due. Contract assets and contract liabilities under the same contract are presented on a net basis, and contract assets and contract liabilities under different contracts are not offset.

28. Employee benefits

(1) Scope of employee benefits

Employee benefits are all forms of considerations or compensation given by an entity in exchange for services rendered by employees or for the termination of employment. Employee benefits include short-term staff remuneration, post-employment benefits, termination benefits and other long-term employee benefits. Employee benefits include benefits provided to employees’ spouses, children, other dependants, survivors of the deceased employees or to other beneficiaries.

Employee benefits are presented as “employee benefits payable” and “long-term employee benefits payable” in the balance sheet, respectively, according to liquidity.


X Financial Report


28. Employee benefits (Cont’d)

(2) Short-term staff remuneration

Employee wages or salaries actually incurred, bonuses, and social insurance contributions such as medical insurance, work injury insurance, maternity insurance, and housing fund, contributed at the applicable benchmarks and rates, are recognised as a liability as the employees provide services, with a corresponding charge to profit or loss or included in the cost of assets where appropriate. Where the payment of liability is expected not to be fully settled within 12 months after the end of the annual reporting period in which the employees render the related services, and the financial impact would be material, these liabilities are measured at their discounted values.

(3) Post-employment benefits

Post-employment benefit plans include defined contribution plans and defined benefit plans. A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate fund and the Group has no further obligations for payment. A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.

Defined contribution plans

Defined contribution plans include basic pension insurance and unemployment insurance.

During the accounting period in which an employee provides service, the amount payable calculated according to the defined contribution plan is recognised as a liability and included in the profit or loss for the current period or the cost of relevant assets.

(4) Termination benefits

When the Group provides termination benefits to employees, employee benefits liabilities arising from termination benefits are recognised in profit or loss for the current period at the earlier of the following dates: when the Group cannot revoke unilaterally compensation for dismissal due to the cancellation of labour relationship plans and employee redundant proposals; the Group recognises cost and expenses related to payment of compensation for dismissal and restructuring.

For the early retirement plans, economic compensations before the actual retirement date were classified as termination benefits. During the period from the date of cease of render of services to the actual retirement date, relevant wages and contribution to social insurance for the employees proposed to be paid are recognised in profit or loss on a one-off basis. Economic compensation after the official retirement date, such as normal pension, is accounted for as post-employment benefits.

(5) Other long-term benefits

Other long-term employee benefits provided by the Group to employees that meet the conditions for defined contribution plans are accounted for in accordance with the relevant provisions relating to defined contribution plans as stated above. If the conditions for defined benefit plans are met, the benefits shall accounted for in accordance with the relevant provisions relating to defined benefit plans, but the “changes arising from the remeasurement of the net liabilities or net assets of the defined benefit plans” in the relevant employee benefits shall be included in the current profit or loss or the relevant asset cost.


X Financial Report


29. Provisions

Obligations pertinent to the contingencies which satisfy the following conditions are recognised as provisions:

(1) the obligation is a current obligation borne by the Group;

(2) it is likely that an outflow of economic benefits from the Group will be resulted from the performance of the obligation; and

(3) the amount of the obligation can be reliably measured.

The provisions shall be initially measured based on the best estimate for the expenditure required for the performance of the current obligation, after taking into account relevant risks, uncertainties, time value of money and other factors pertinent to the contingencies. If the time value of money has significant influence, the best estimates shall be determined after discounting the relevant future cash outflow. The Group reviews the carrying amount of the provisions on the balance sheet date and adjust the carrying amount to reflect the current best estimates.

If all or some expenses incurred for settlement of recognised provisions are expected to be borne by the third party, the compensation amount shall, on a recoverable basis, be recognised as asset separately, and compensation amount recognised shall not be more than the carrying amount of provisions.

30. Share-based payments

(1) Category of share-based payment

The Group’s share-based payment is equity-based.

(2) Fair value of equity instrument

For the existence of an active market for options and other equity instruments granted by the Group, the fair value is determined at the active market quotations. For options and other equity instruments with no active market, option pricing model shall be used to estimate the fair value of the equity instruments. The following factors shall be taken into account using option pricing models: A. the exercise price of the option, B. the validity of the option, C. the current market price of the share, D. the expected volatility of the share price, E. predicted dividend of the share, and F. risk-free rate of the option within the validity period.

(3) Recognition of vesting of equity instrument based on the best estimate

During the waiting period at each balance sheet date, the Group shall make the best available estimate of the number of equity instruments expected to vest and shall revise that estimate, if necessary, if subsequent information indicates that the number of equity instruments expected to vest differs from previous estimates. On the vesting date, the entity shall revise the estimate to equal the number of equity instruments that ultimately vested.


X Financial Report


30. Share-based payments (Cont’d)

(4) Accounting treatment of implementation, modification and termination of share-based payment

Equity-settled share-based payment is measured at the fair value of the equity instruments granted to employees. For the shares exercise immediately after the grant, the fair value of equity instrument at the grant date included in the relevant costs or expenses and increase in capital reserve accordingly. Within the vesting period, it will recognise the received service-related costs or expense and capital reserves for each reporting date based on the best estimate of the number of vested equity instruments on the grant date of the equity instruments value. After the vesting period, relevant costs or expenses and total shareholders’ equity has been confirmed and will not be adjusted.

When there is changes in Group’s share-based payment plans, if the modification increases the fair value of the equity instruments granted, corresponding recognition of service increase in accordance with the increase in the fair value of the equity instruments; if the modification increases the number of equity instruments granted, the increase in fair value of the equity instruments is recognised as a corresponding increase in service achieved. Increase in the fair value of equity instruments refer to the difference between the fair values of the modified date. If the modification reduces the total fair value of shares paid or not conductive to the use of other employees share-based payment plans to modify the terms and conditions of service, it will continue to be accounted for in the accounting treatment, as if the change had not occurred, unless the Group cancelled some or all of the equity instruments granted.

During the vesting period, if the cancelled equity instruments (except for failure to meet the conditions of the non-market vesting conditions, such as length of service performance conditions or market conditions are cancelled) granted by the Group to cancel the equity instruments granted amount treated as accelerated vesting of the remaining period should be recognised immediately in profit or loss, while recognizing the capital reserve. If employees or other parties can choose to meet non-vesting conditions but they are not met in the vesting period, the Group will treat them as cancelled equity instruments granted.

31. Preference shares, perpetual bonds and other financial instruments

(1) Classification of financial liabilities and equity instruments

Financial instruments issued by the Group are classified into financial assets, financial liabilities or equity instruments on the basis of the substance of the contractual arrangements and the economic nature not only its legal form, together with the definition of financial asset, financial liability and equity instruments on initial recognition.

(2) Accounting treatment of preference shares, perpetual bonds and other financial instruments

Financial instruments issued by the Group are initially recognised and measured in accordance with the financial instrument standards; thereafter, interest or dividends are accrued on each balance sheet date and accounted for in accordance with relevant specific ASBEs, i.e. to determine the accounting treatment for interest expenditure or dividend distribution of the instrument based on the classification of the financial instrument issued. For financial instruments classified as equity instruments, their interest expenses or dividend distributions are treated as profit distribution of the Group, and their repurchases and cancellations are treated as changes in equity; for financial instruments classified as financial liabilities, their interest expenses or dividend distribution are in principle accounted for with reference to borrowing costs, and the gains or losses arising from their repurchases or redemption are included in the profit or loss for the current period.

For the transaction costs such as fees and commissions incurred by the Group for issuing financial instruments, if such financial instruments are classified as debt instruments and measured at amortised cost, they are included in the initial measured amount of the instruments issued; if such financial instruments are classified as equity instruments, they are deducted from equity.


X Financial Report


32. Revenue

(1) General principles

The Group recognises revenue when it satisfies a performance obligation in the contract, i.e. when the customer obtains control of the relevant goods or services.

Where a contract has two or more performance obligations, the Group allocates the transaction price to each performance obligation based on the percentage of respective unit price of goods or services guaranteed by each performance obligation, and recognises as revenue based on the transaction price that is allocated to each performance obligation.

If one of the following conditions is fulfilled, the Group performs its performance obligation within a certain period; otherwise, it performs its performance obligation at a point of time:

① when the customer simultaneously receives and consumes the benefits provided by the Group when the Group performs its obligations under the contract;

② when the customer is able to control the goods in progress in the course of performance by the Group under the contract;

③ when the goods produced by the Group under the contract are irreplaceable and the Group has the right to payment for performance completed to date during the whole contract term.

For performance obligations performed within a certain period, the Group recognises revenue by measuring the progress towards complete of that performance obligation within that certain period. When the progress of performance cannot be reasonably determined, if the costs incurred by the Group are expected to be compensated, the revenue shall be recognised at the amount of costs incurred until the progress of performance can be reasonably determined.

For performance obligation performed at a point of time, the Group recognises revenue at the point of time at which the customer obtains control of relevant goods or services. To determine whether a customer has obtained control of goods or services, the Group considers the following indications:

① the Group has the current right to receive payment for the goods, which is when the customers have the current payment obligations for the goods;

② the Group has transferred the legal title of the goods to the customer, which is when the client possesses the legal title of the goods;

③ the Group has transferred the physical possession of goods to the customer, which is when the customer obtains physical possession of the goods;

④ the Group has transferred all of the substantial risks and rewards of ownership of the goods to the customer, which is when the customer obtain all of the substantial risks and rewards of ownership of the goods to the customer;

⑤ the customer has accepted the goods;

⑥ other information indicates that the customer has obtained control of the goods.


X Financial Report


32. Revenue (Cont’d)

(1) General principles (Cont’d)

The Group’s right to consideration in exchange for goods or services that the Group has transferred to customers (and such right depends on factors other than passage of time) is accounted for as contract assets, and contract assets are subject to impairment based on ECLs (see Note V. 25). The Group’s unconditional right to receive consideration from customers (only depends on passage of time) is accounted for as accounts receivable. The Group’s obligation to transfer goods or services to customers for which the Group has received or should receive consideration from customers is accounted for as contract liabilities.

Contract assets and contract liabilities under the same contract are presented on a net basis. Where the net amount has a debit balance, it is presented in “contract assets” or “other non-current assets” according to its liquidity. Where the net amount has a credit balance, it is presented in “contract liabilities” or “other non-current liabilities” according to its liquidity.

(2) Specific methods

Specific method for revenue recognition of machine-made paper business of the Group: in terms of domestic sales of machine-made paper, revenue is recognised when goods are delivered to the customers and such deliveries are confirmed; while in terms of overseas sales of machine-made paper, revenue is recognised on the day when goods are loaded on board and declared.

Specific method for recognition of finance lease income of the Group: according to the repayment schedule, the income is recognised by instalments according to the effective interest rate.

Specific method for recognition of revenue from real estate of the Group: revenue is recognised by amortising the rental income on a straight-line basis over the lease term.

33. Government grants

A government grant is recognised when there is reasonable assurance that the grant will be received and that the Group will comply with the conditions attaching to the grant.

If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable. If a government grant is in the form of a transfer of non-monetary asset, it is measured at fair value; if the fair value cannot be obtained in a reliable way, it is measured at the nominal amount of RMB1.

Government grants obtained for acquisition or construction of long-term assets or other forms of long-term asset formation are classified as government grants related to assets, while the remaining government grants are classified as government grants related to revenue.

Regarding the government grant not clearly defined in the official documents and can form long-term assets, the part of government grant which can be referred to the value of the assets is classified as government grant related to assets and the remaining part is government grant related to revenue. For the government grant that is difficult to distinguish, the entire government grant is classified as government grant related to revenue.


X Financial Report


33. Government grants (Cont’d)

A government grant related to an asset shall be recognised as deferred income, and evenly amortised to profit or loss over the useful life of the asset in a reasonable and systematic manner. For a government grant related to revenue, if the grant is a compensation for related costs, expenses or losses incurred, the grant shall be recognised in profit or loss for the current period; if the grant is a compensation for related costs, expenses or losses to be incurred in subsequent periods, the grant shall be recognised as deferred income, and recognised in profit or loss over the periods in which the related costs, expenses or losses are recognised. A government grant measured at nominal amount is directly included in profit or loss for the current period. The Group adopts a consistent approach to the same or similar government grants.

A government grant related to daily activities is recognised in other gains relying on the essence of economic business; otherwise, recognised in non-operating income or non-operating expenses.

For the repayment of a government grant already recognised, if there is any related deferred income, the repayment shall be off set against the carrying amount of the deferred income, and any excess shall be recognised in profit or loss for the current period; otherwise, the repayment shall be recognised immediately in profit or loss for the current period.

For the policy preferential interest subsidy, if it is provided by the financial authority through banks, it is recognised at the amount of borrowings actually received, and the borrowings costs are calculated based on the principal of the borrowings and the policy preferential interest rate; if it is provided by the financial authority directly, the corresponding interest will be used to offset the relevant borrowing expenses.

34. Deferred income tax assets/deferred income tax liabilities

Income tax comprises current income tax expense and deferred income tax expense, which are included in profit or loss for the current period as income tax expenses, except for deferred tax related to transactions or events that are directly recognised in owners’ equity which are recognised in owners’ equity, and deferred tax arising from a business combination, which is adjusted against the carrying amount of goodwill.

Temporary differences arising from the difference between the carrying amount of an asset or liability and its tax base at the balance sheet date of the Group shall be recognised as deferred income tax using the balance sheet liability method.

All the taxable temporary differences are recognised as deferred income tax liabilities except for those incurred in the following transactions:

(1) The initial recognition of goodwill, and the initial recognition of an asset or liability in a transaction which is neither a business combination nor affects accounting profit or taxable profit (or deductible loss) when the transaction occurs;

(2) The taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, and the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.


X Financial Report


34. Deferred income tax assets/deferred income tax liabilities (Cont’d)

The Group recognises a deferred income tax asset for the carry forward of deductible temporary differences, deductible losses and tax credits to subsequent periods, to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences, deductible losses and tax credits can be utilised, except for those incurred in the following transactions:

(1) The transaction is neither a business combination nor affects accounting profit or taxable profit (or deductible loss) when the transaction occurs;

(2) The deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, the corresponding deferred income tax asset is recognised when both of the following conditions are satisfied: it is probable that the temporary difference will reverse in the foreseeable future, and it is probable that taxable profits will be available in the future, against which the temporary difference can be utilised.

At the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, and their tax effect is reflected accordingly.

At the balance sheet date, the Group reviews the carrying amount of a deferred income tax asset. If it is probable that sufficient taxable profits will not be available in future periods to allow the benefit of the deferred tax asset to be utilised, the carrying amount of the deferred tax asset is reduced. Any such reduction in amount is reversed when it becomes probable that sufficient taxable profits will be available.

35. Lease

(1) Identification of leases

On the beginning date of the contract, the Group (as a lessee or lessor) assesses whether the customer in the contract has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use and has the right to direct the use of the identified asset throughout the period of use. If a contract conveys the right to control the use of an identified asset and multiple identified assets for a period of time in exchange for consideration, the Group identifies such contract is, or contains, a lease.

(2) The Group as lessee

On the beginning date of the lease, the Company recognises right-of-use assets and lease liabilities for all leases, except for short-term lease and low-value asset lease with simplified approach.

The accounting policy for right-of-use assets is set out in Note V. 23.

The lease liability is initially measured at the present value of the lease payments that are not paid at the beginning date of the lease using the interest rate implicit in the lease or the incremental borrowing rate. Lease payments include fixed payments and in-substance fixed payments, less any lease incentives receivable; variable lease payments that are based on an index or a rate; the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; payments for terminating the lease, if the lease term reflects the lessee exercising that option of terminating; and amounts expected to be payable by the lessee under residual value guarantees. Subsequently, the interest expense on the lease liability for each period during the lease term is calculated using a constant periodic rate of interest and is recognised in profit or loss for the current period. Variable lease payments not included in the measurement of lease liabilities are charged to profit or loss in the period in which they actually arise. The Group calculates the interest expense of the lease liability for each period of the lease term based on the fixed periodic interest rate and is included in the current profit and loss. The variable lease payments that are not included in the measurement of the lease liability are recognised in profit or loss when incurred.


X Financial Report


35. Lease (Cont’d)

(2) The Group as lessee (Cont’d)

Short-term lease

Short-term leases refer to leases with a lease term of less than 12 months from the commencement date, except for those with a purchase option.

Lease payments on short-term leases are recognised in the cost of related assets or current profit or loss on a straight-line basis over the lease term.

For short-term leases, the Group chooses to adopt the above simplified approach for the following types of assets that meet the conditions of short-term lease according to the classification of leased assets.

Low-valve machinery and equipment

Transportation vehicles

Low-value asset lease

A low-value asset lease is a lease that the value of a single leased asset is below RMB2,000,000 when it is a new asset.

For a low-value asset lease, the Group chooses the above simplified approach based on the specific circumstances of each lease.

Lease payments on low-value asset leases are recognised on a straight-line basis over the lease term, and either included in the cost of the related asset or charged to profit or loss for the current period.

(3) The Group as lessor

When the Group is a lessor, a lease is classified as a finance lease whenever the terms of the lease transfer substantially all the risks and rewards of asset ownership to the lessee. All leases other than financial leases are classified as operating leases.

Operating lease

Lease payments under operating leases are recognised in profit or loss on a straight-line basis over the lease term. Initial direct costs incurred in relation to operating leases are capitalised and amortised over the lease term on the same basis as rental income and recognised in profit or loss for the current period. The variable lease payments obtained in relation to operating leases that are not included in the lease payments are recognised in profit or loss in the period in which they actually incurred.


X Financial Report


35. Lease (Cont’d)

(4) Sale and leaseback

The lessee and the lessor shall assess and determine whether the transfer of assets in a sale and leaseback transaction is a sale in accordance with the requirements of the Accounting Standard for Business Enterprises No. 14 – Revenue.

Where asset transfer under the sale and leaseback transactions is a sale, the lessee shall measure the right-of-use assets created by the sale and leaseback based on the portion of carrying amount of the original assets related to right of use obtained upon leaseback, and only recognise relevant profit or loss for the right transferred to the lessor. The lessor shall account for the purchase of assets in accordance with other applicable ASBEs and account for the lease of assets in accordance with this standard.

Where asset transfer under the sale and leaseback transactions is not a sale, the lessee shall continue to recognise the transferred assets while recognising a financial liability equal to the transfer income and account for such liability according to the Accounting Standard for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments; or not to recognise the transferred assets but recognise a financial asset equal to the transfer income and account for such asset according to the Accounting Standard for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments.

36. General risk reserves

General risk reserve is a reserve provided from net profit for the partial offset unidentified possible losses.

Adopting the principle of dynamic provisioning, the Finance Company employs the standard method to quantitatively analyse the risk situation faced by risk assets, to determine the estimated potential risk value. After calculating the potential risk value, if the potential risk value is higher than the provision for impairment of assets, the accrued provision for impairment of assets will be deducted and provision for general risk will be made. If the potential risk value is lower than the provision for impairment of assets, provision for general risk will not be made.

Dynamic provisioning is a counter-cyclical provisioning method adopted by financial companies based on changes in the macroeconomic situation, as in, in the upward cycle of macro economy and when the risk asset default rate is relatively low, more provisions are made to enhance financial buffer capacity; and in the downturn cycle of macro economy and when the risk asset default rate is relatively high, the accumulated provisions are used to absorb asset losses.

The Finance Company makes general risk provisions for assets bearing risks and losses at the end of each year, the balance of which, in principle, shall not be lower than 1.5% of the closing balance of risk assets. The risk provision made by factoring companies shall not be lower than 1% of the closing balance of the financial factoring business.

Based on changes in the macroeconomic situation, and with reference to non-performing corporate loans, non-performing loan ratio, provision coverage ratio for non-performing loans, loan provision ratio, standard risk factor and the requirement of general risk provision as a percentage of risk assets, the Ministry of Finance makes adjustments to the scope of risk assets for general risk provisions, standard risk factor and the requirement of general risk provision as a percentage of risk assets as appropriate. The Finance Company shall make adjustments accordingly according to the requirements of the Ministry of Finance.

Provisions for general risk are insufficient, in principle, the company shall not engage in after-tax profit distribution. As considered and approved by the board of directors and general meeting of the Finance Company, such provisions may be used to offset losses but not for dividends. For special reasons, as approved by the Board and the general meeting, general risk reserves may be reclassified into undistributed profits.


X Financial Report


37. Critical accounting judgments and estimates

The Group gives continuous assessment on, among other things, the reasonable expectations of future events and the critical accounting estimates and key assumptions adopted according to its historical experience and other factors. The critical accounting estimates and key assumptions that are likely to lead to significant adjustment risks of the carrying amount of assets and liabilities for the next financial year are listed as follows:

Classification of financial assets

Significant judgements involved in determining the classification of financial assets include the analysis of business models and contractual cash flow characteristics.

Factors considered by the Group in determining the business model for a group of financial assets include how the asset’s performance is evaluated and reported to key management personnel, how risks are assessed and managed and how the relevant management personnel are compensated.

When the Group assesses whether the contractual cash flows of the financial assets are consistent with basic lending arrangements, the main judgements are described as below: whether the principal amount may change over the life of the financial asset (for example, if there are repayments of principal); whether the interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin and cost. For example, whether the amount repaid in advance reflects only the outstanding principal and interest thereon, as well as reasonable compensation paid for early termination of the contract.

Measurement of the ECLs of accounts receivable

The Group calculates the ECLs of accounts receivable using the exposure to default risk and ECL rate of accounts receivable, and determines the ECL rate based on default probability and default loss rate. When determining the ECL rate, the Group adjusts its historical data by referring to information such as historical credit loss experience as well as current situation and forward-looking information. When considering the forward-looking information, indicators used by the Group include the risk of economic downturn, external market environment, technology environment and changes in customers. The assumptions relating to the ECL calculation are monitored and reviewed by the Group on a regularly basis.

Deferred income tax assets

Deferred income tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred income tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.


X Financial Report

VI. Taxation

1. Main tax types and tax rates

Tax type Tax base and rate

Value added tax (VAT) 13% for general, 9% for sales of water and gas and 6% for the service industry. VAT is computed on the difference after deduction of input value-added tax.

Urban maintenance and construction tax

7%, 3%, 2% and 0.5% of actual payment of turnover tax.

Enterprise income tax (EIT) 25% of taxable income; for the companies which are subject to preferential policies, please refer to the table below; the overseas companies shall pay taxes at the tax rate pursuant to the requirements of the countries or regions where the companies are located.

Companies subject to different income tax rates are disclosed as follows

Name of taxpayer Income tax rate

Shandong Chenming Paper Holdings Limited 15%

Shouguang Meilun Paper Co., Ltd. 15%

Jilin Chenming Paper Co., Ltd. 15%

Jiangxi Chenming Paper Co., Ltd. 15%

Zhanjiang Chenming Pulp & Paper Co., Ltd. 15%

Shouguang Shun Da Customs Declaration Co, Ltd. 10%

Qingdao Chenming Pulp & Paper Electronic Commodity Spot Trading Co., Ltd. 10%

Zhanjiang Chenming Arboriculture Development Co., Ltd. Exempt from EIT

Nanchang Chenming Arboriculture Development Co., Ltd. Exempt from EIT

Chenming Arboriculture Co., Ltd. Exempt from EIT

Yangjiang Chenming Arboriculture Development Co., Ltd. Exempt from EIT


X Financial Report

VI. Taxation (Cont’d)

2. Tax incentives

(1) Enterprise income tax

On 16 August 2018, the Company received a high and new technology enterprise certificate with a certification number of GR201837000311. Pursuant to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies, the Company is subject to a corporate income tax rate of 15% of taxable income, and is entitled to the preferential treatment from 2018 to 2020.

Shouguang Meilun Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprise certificate with a certification number of GR201837000455 on 16 August 2018. Pursuant to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies, Shouguang Meilun is subject to an enterprise income tax rate of 15% of taxable income, and is entitled to the preferential treatment from 2018 to 2020.

For Jilin Chenming Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprise certificate with a certification number of GR201922000658 on 2 September 2019. Pursuant to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies, it is subject to a corporate income tax rate of 15% of taxable income, and is entitled to the preferential treatment from 2019 to 2021.

For Jiangxi Chenming Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprise certificate with a certification number of GR201936002184 on 3 December 2019. Pursuant to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies, it is subject to a corporate income tax rate of 15% of taxable income, and is entitled to the preferential treatment from 2019 to 2021.

Zhanjiang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, received a high and new technology enterprise certificate with a certification number of GR20184400547 on 28 November 2018. Pursuant to the requirements under the Law of the People’s Republic of China on Enterprise Income Tax and the relevant policies, it is subject to a corporate income tax rate of 15% of taxable income, and is entitled to the preferential treatment from 2018 to 2020.

Pursuant to the requirements of Rule 27(1) of Law of the People’s Republic of China on Enterprise Income Tax and Rule 86(1) of regulations for the Implementation of Law of the People’s Republic of China on Enterprise Income Tax, Zhanjiang Chenming Arboriculture Development Co., Ltd. and Yangjiang Chenming Arboriculture Development Co., Ltd., which are the subsidiaries of the Company, have completed the filings for EIT reduction for exemption from EIT.


X Financial Report

VI. Taxation (Cont’d)

2. Tax incentives (Cont’d)

(2) Value-added Tax (“VAT”)

Pursuant to Rule 10 of the Interim Regulation of the People’s Republic of China on Value Added Tax, Zhanjiang Chenming Arboriculture Development Co., Ltd. and Yangjiang Chenming Arboriculture Development Co., Ltd., which are the subsidiaries of the Company, are exempt from VAT, and have completed the filings for VAT reduction for exemption from VAT.

Pursuant to the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use of Resources (Cai Shui [2015] No. 78), taxpayers who sell self-produced products and services applying integrated use of resources may enjoy the immediate VAT refund policy. Zhanjiang Chenming New-style Wall Materials Co., Ltd., a subsidiary of the Company, produced products applying raw materials containing more than 30% of fly ash. It belongs to a company that uses pollutants for production, and is therefore subject to the immediate VAT refund policy in 2020.

Pursuant to the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use of Resources (Cai Shui [2015] No. 78), taxpayers who sell self-produced products and services applying integrated use of resources may enjoy the immediate VAT refund policy. Shandong Chenming Panels Co., Ltd., a subsidiary of the Company, produced products applying integrated use of resources, and is therefore subject to the immediate VAT refund policy in 2020.

Pursuant to the Value-added Tax Preferential Catalogue on Products and Services Applying Integrated Use of Resources (Cai Shui [2015] No. 78), taxpayers who sell self-produced products and services applying integrated use of resources may enjoy the immediate VAT refund policy. Shouguang Chenming Cement Co., Limited, a subsidiary of the Company, produced products applying integrated use of resources, and is therefore subject to the immediate VAT refund policy in 2020.


X Financial Report

VII. Notes to items of the consolidated financial statements

1. Monetary funds

Unit: RMB

Item Closing balance Opening balance

Treasury cash 3,240,007.66 2,418,131.86Bank deposit 2,210,042,623.10 2,965,127,198.70Other monetary funds 17,088,478,523.90 16,338,984,142.77

Total 19,301,761,154.66 19,306,529,473.33

Of which: Total deposits in overseas banks 359,705,929.81 405,881,189.78

Notes: ① Other monetary funds of RMB12,368,983,244.21 (31 December 2019: RMB11,796,498,642.44) were the guarantee deposit for the application for bank acceptance with the banks by the Group.

② Other monetary funds of RMB2,121,287,629.87 (31 December 2019: RMB2,091,467,385.94) were the guarantee deposit for the application for letter of credit with the banks by the Group.

③ Other monetary funds of RMB1,921,790,589.38 (31 December 2019: RMB1,846,470,647.92) were the guarantee deposit for the application for guarantees with the banks by the Group.

④ Other monetary funds of RMB408,693,277.15 (31 December 2019: RMB440,810,000.00) were the Group’s statutory reserve deposit at the banks.

⑤ Other monetary funds of RMB2,125,345.50 (31 December 2019: RMB995,129.48) were locked-up due to litigations, resulting in restriction on the use of that account’s balance.

⑥ The other monetary funds include interest receivable of RMB265,598,437.79.


X Financial Report

VII. Notes to items of the consolidated financial statements (Cont’d)


(1) Disclosure of accounts receivable by category

Unit: RMB

Closing balance Opening balance

Book balance Bad debts provision Book balance Bad debts provision

Category Amount Percentage Amount

Provision

percentage

Carrying

amount Amount Percentage Amount

Provision

percentage

Carrying

amount

Accounts receivable assessed

individually for impairment 124,495,140.17 4.30% 124,495,140.17 100.00% 0 117,277,135.48 3.81% 117,277,135.48 100.00% 0


collectively for impairment 2,773,270,689.28 95.70% 475,575,242.54 17.15% 2,297,695,446.74 2,960,085,058.36 96.19% 435,001,747.33 14.70% 2,525,083,311.03

Of which:

Accounts receivable from

related parties 25,652,085.29 0.89% 2,380,460.92 9.28% 23,271,624.37 2,008,185.60 0.07% 61,132.76 3.04% 1,947,052.84

Accounts receivable from

distributor clients 1,969,061,227.30 67.95% 326,725,018.95 16.59% 1,642,336,208.35 2,202,548,603.03 71.57% 307,333,600.87 13.95% 1,895,215,002.16

Factoring receivables 778,557,376.69 26.87% 146,469,762.67 18.81% 632,087,614.02 755,528,269.73 24.55% 127,607,013.70 16.89% 627,921,256.03

Total 2,897,765,829.45 100.00% 600,070,382.71 20.71% 2,297,695,446.74 3,077,362,193.84 100.00% 552,278,882.81 17.95% 2,525,083,311.03


X Financial Report


2. Accounts receivable (Cont’d)

(1) Disclosure of accounts receivable by category (Cont’d)

Items assessed individually for impairment:

Unit: RMB

Closing balance

Name Book balanceBad debts provision

Provision percentage Reasons for provision

Hengfeng Hongyuan Real Estate Holdings Co., Ltd.

45,500,000.00 45,500,000.00 100.00% Due to poor management, the financial indicators of the company deteriorated and its repayment ability substantially declined

Foshan Shunde Xingchen Paper Co., Ltd.


Ningxia Lingwu Baota Dagu Storage and Transportation Co., Ltd.


Beijing Huaxia Power Culture Media Co., Ltd.


47 companies including Jiangxi Longming Enterprise Co., Ltd.


Total 124,495,140.17 124,495,140.17 – –

Items assessed collectively for impairment:

Accounts receivable with collective provision for bad debts based on receivables from related parties

Unit: RMB

Closing balance


Provision percentage

Within 1 year 13,453,177.37 814,471.17 6.05%1 to 2 years 11,393,260.18 1,370,890.31 12.03%2 to 3 years 805,647.74 195,099.44 24.22%

Total 25,652,085.29 2,380,460.92 –


X Financial Report




Accounts receivable with collective provision for bad debts based on receivables from distributor clients

Unit: RMB

Closing balance



Within 1 year 1,356,307,954.92 21,065,204.22 1.55%1 to 2 years 329,934,211.44 72,588,902.22 22.00%2 to 3 years 55,832,347.15 17,735,625.89 31.77%Over 3 years 226,986,713.79 215,335,286.62 94.87%

Total 1,969,061,227.30 326,725,018.95 –

Accounts receivable with collective provision for bad debts based on factoring receivables

Unit: RMB

Closing balance



Within 1 year 620,418,416.69 128,655,866.67 20.74%1 to 2 years 158,138,960.00 17,813,896.00 11.26%

Total 778,557,376.69 146,469,762.67 –


X Financial Report




Disclosure by ageing

Unit: RMB

Ageing Closing balance Opening balance

Within 1 year (including 1 year) 1,975,452,308.32 2,440,760,038.211 to 2 years 502,455,831.77 397,312,284.082 to 3 years 187,335,446.71 70,484,233.21Over 3 years 232,522,242.65 168,805,638.34

Subtotal 2,897,765,829.45 3,077,362,193.84

Bad debts provision 600,070,382.71 552,278,882.81

Total 2,297,695,446.74 2,525,083,311.03

(2) Provision, recovery or reversal of bad debt provision for the period

Bad debt provision for the period:

Unit: RMB

Changes in the period

CategoryOpening balance Provision

Recovery or reversal Write-off Others

Closing balance

Accounts receivable with provision for bad debt 552,278,882.81 50,618,019.25 2,826,519.34 600,070,382.71

Total 552,278,882.81 50,618,019.25 2,826,519.34 600,070,382.71

(3) Top five accounts receivable based on closing balance of debtors

The total amount of the Company’s top five accounts receivable based on closing balance of debtors for the period was RMB961,602,717.39, which accounted for 33.18% of the closing balance of the total accounts receivable. The closing balance of corresponding bad debt provision amounted to RMB153,122,029.71.


X Financial Report


3. Accounts receivable financing

Unit: RMB


Bills receivable 1,418,702,732.26 442,915,861.70

Total 1,418,702,732.26 442,915,861.70

Other explanation:

Bill receivable pledged by the Group at the end of the period:

Item Closing balance

Bank acceptance bill 366,587,869.44

Total 366,587,869.44

4. Prepayments

(1) Presentation of prepayments stated according to ageing analysis

Unit: RMB

Closing balance Opening balanceAgeing Amount Percentage Amount Percentage

Within 1 year 722,311,037.62 98.76% 528,554,005.66 87.57%1-2 years 9,092,198.14 1.24% 75,019,543.42 12.43%

Total 731,403,235.76 – 603,573,549.08 –

(2) Top five prepayments according to closing balance of prepaid parties

Top five prepayments according to closing balance of prepaid parties was RMB401,058,608.97, which accounted for 54.83% of the closing balance of the total accounts payable.


X Financial Report



Unit: RMB


Dividends receivable 13,000,000.00 13,000,000.00Other receivables 3,116,061,804.47 2,203,654,598.66

Total 3,129,061,804.47 2,216,654,598.66

(1) Dividends receivable

1) Classification of dividends receivable

Unit: RMB

Item (or investee) Closing balance Opening balance

Weifang Xingxing United Chemical Co., Ltd 13,000,000.00 13,000,000.00

Total 13,000,000.00 13,000,000.00

(2) Other receivables

1) Other payables by nature

Unit: RMB

NatureClosing

book balanceOpening

book balance

Open credit 2,971,708,307.75 2,043,396,146.61Guarantee deposit 60,901,897.21 24,109,727.59Advances 1,868,651.26 15,799,693.34Insurance premium 3,700,154.18 17,650.66Reserve and borrowings 18,148,625.07 17,045,478.09Others 59,734,169.00 103,285,902.37

Total 3,116,061,804.47 2,203,654,598.66


X Financial Report


5. Other receivables (Cont’d)

(2) Other receivables (Cont’d)

2) Particulars of bad debt provision

Unit: RMB

Phase 1 Phase 2 Phase 3

Bad debt provisionECLs for the

next 12 months

ECLs over the entire life (not

credit-impaired)

ECLs over the entire life

(credit-impaired) Total

Balance as at 1 January 2020 169,202,744.32 326,147,132.58 495,349,876.90Balance as at 1 January 2020 during the period – – – – –Transferred into Phase 2 –Transferred into Phase 3 326,147,132.58 326,147,132.58 –Reversal to Phase 2 –Reversal to Phase 1 169,202,744.32 169,202,744.32Provision for the period 7,219,809.98 7,219,809.98Reversal for the period 18,994,740.83 75,363,658.86 94,358,399.69Transfer for the periodWrite-off for the periodOther changesBalance as at 30 June 2020 157,427,813.47 250,783,473.72 408,211,287.19

By ageing

Unit: RMB

Ageing Closing balance Opening balance

Within 1 year (including 1 year) 2,305,069,753.20 1,601,285,972.691-2 years 1,017,960,400.03 920,980,164.232-3 years 96,790,390.20 82,752,788.663-4 years 20,226,080.16 18,199,261.774-5 years 17,164,897.91 26,242,336.99Over 5 years 67,061,570.16 49,543,951.22

Subtotal 3,524,273,091.66 2,699,004,475.56

Less: Bad debt provision 408,211,287.19 495,349,876.90

Total 3,116,061,804.47 2,203,654,598.66


X Financial Report




3) Provision, recovery or reversal of bad debt provision for the period

Provision of bad debt provision for the period:

Unit: RMB




Closing balance

Bad debt provision for other receivables 495,349,876.90 7,219,809.98 94,358,399.69 408,211,287.19

Total 495,349,876.90 7,219,809.98 94,358,399.69 408,211,287.19

4) Top five other receivables according to closing balance of debtors

The top five other accounts receivable based on closing balance of debtors for the period amounted to RMB2,537,485,412.78 in total, accounting for 72.00% of the total closing balance of other accounts receivable. The closing balance of the corresponding bad debt provision amounted to RMB297,887,552.29 in total.

5) Receivables in respect of government grant

Unit: RMB

Name of entity Name of government grant Closing balance Closing ageTime of

reception

Wuhan Chenming Hanyang Paper Holdings Co., Ltd.

Final payment of relocation compensation

533,390,000.00 Within one year 1 July 2020


X Financial Report


6. Inventories

Whether the New Revenue Standard has been implemented

√ Yes □ No

(1) Categories of inventories

Unit: RMB


Item Book balance

Impairment provision for

inventories or performance costs Carrying amount Book balance


inventories or performance costs Carrying amount

Raw materials 1,902,641,983.51 18,670,304.78 1,883,971,678.73 1,972,197,240.93 21,269,429.01 1,950,927,811.92Work-in-process products 46,382,707.70 46,382,707.70 81,382,693.49 81,382,693.49Goods in stock 1,899,848,296.97 1,899,848,296.97 886,102,819.24 886,102,819.24Consumable biological assets 1,556,753,786.65 1,556,753,786.65 1,541,004,633.42 1,541,004,633.42Developing products 314,614,378.34 314,614,378.34 315,012,152.74 315,012,152.74

Total 5,720,241,153.17 18,670,304.78 5,701,570,848.39 4,795,699,539.82 21,269,429.01 4,774,430,110.81

(2) Impairment provision for inventories or performance costs

Unit: RMB

Increase for the period Decrease for the periodItem Opening balance Provision Others Reversal or transfer Others Closing balance

Raw materials 21,269,429.01 2,599,124.23 18,670,304.78

Total 21,269,429.01 2,599,124.23 18,670,304.78

7. Non-current assets due within one year

Unit: RMB


Long-term receivables due within one year 6,010,580,174.26 6,974,539,613.30

Total 6,010,580,174.26 6,974,539,613.30


X Financial Report


8. Other current assets

Unit: RMB


VAT recoverable 1,157,984,356.26 1,431,298,632.04Prepaid tax 46,114,054.50 56,778,563.04Receivables under financial lease due within one year 5,602,015,240.62 5,229,125,471.51Factoring receivables due within one year 1,043,959,033.92 1,008,707,988.47Prepaid expenses 685,359,071.56 366,080,343.71Others 22,975,892.27 16,716,395.93

Total 8,558,407,649.13 8,108,707,394.70

9. Long-term receivables

(1) Particulars of long-term receivables

Unit: RMB


Item Book balanceBad debt provision Carrying amount Book balance

Bad debt provision Carrying amount

Discount rate range

Finance lease payments 6,908,421,427.84 583,399,494.29 6,325,021,933.55 8,144,589,680.91 182,532,601.30 7,962,057,079.61 4%-20%Less: Unrealised financing income 142,692,516.64 – 142,692,516.64 462,276,887.85 462,276,887.85Less: non-current assets due within one year 6,551,087,262.04 580,514,958.75 5,970,572,303.29 7,004,375,494.85 159,382,707.55 6,844,992,787.30Subtotal 214,641,649.16 2,884,535.54 211,757,113.62 677,937,298.21 23,149,893.75 654,787,404.46Deposit for finance lease 637,879,277.38 - 637,879,277.38 734,530,650.26 734,530,650.26Less: Unrealised financing income 46,532,961.75 - 46,532,961.75 59,195,417.77 59,195,417.77Less: non-current assets due within one year 39,557,909.14 - 39,557,909.14 129,546,826.00 129,546,826.00Subtotal 551,788,406.49 - 551,788,406.49 545,788,406.49 545,788,406.49

Total 766,430,055.65 2,884,535.54 763,545,520.11 1,223,725,704.70 23,149,893.75 1,200,575,810.95


X Financial Report


9. Long-term receivables (Cont’d)

(1) Particulars of long-term receivables (Cont’d)

Particulars of bad debt impairment provision

Unit: RMB



next 12 months


credit-impaired)

ECLs over the entire life

(credit-impaired) Total

Balance as at 1 January 2020 3,124,322.44 20,025,571.31 23,149,893.75Balance as at 1 January 2020 during the period –Transferred into Phase 2 –Transferred into Phase 3 20,025,571.31 20,025,571.31 –Reversal to Phase 2 –Reversal to Phase 1 3,124,322.44 3,124,322.44Provision for the yearReversal for the year 2,440,892.95 17,824,465.26 20,265,358.21Transfer for the yearWrite-off for the yearOther changesBalance as at 30 June 2020 683,429.49 2,201,106.05 2,884,535.54


X Financial Report



Unit: RMB

Change for the period

Investee Opening balance

Additional

contribution

Investment

gain or loss

recognised

under equity

method

Adjustment

of other

comprehensive

income

Other change

in equity

interest

Distribution

of cash

dividend or

profit declared

Impairment

provision Closing balance

Closing balance

of impairment

provision

I. Joint ventures

Shouguang Chenming Huisen New-style

Construction Materials Co., Ltd. 3,789,667.61 740,169.16 1,200,000.00 3,329,836.77

Weifang Sime Darby West Port Co., Ltd 89,726,671.76 -2,880,211.17 86,846,460.59

Shouguang Meite Environmental

Technology Co., Ltd. 5,880,000.00 -257,524.39 5,622,475.61

Weifang Chenrong New and Old Kinetic

Energy Conversion Equity Investment Fund

Partnership (Limited Partnership 158,000,000.00 42,000,000.00 -553,476.37 199,446,523.63

Weifang Xingxing United Chemical Co., Ltd. 93,816,557.39 -1,459,789.79 92,356,767.60

Subtotal 351,212,896.76 42,000,000.00 -4,410,832.56 1,200,000.00 387,602,064.20

II. Associates

Jiangxi Jiangbao Media Colour Printing Co. Ltd. 0.00 0.00

Zhuhai Dechen New Third Board Equity

Investment Fund Company

(Limited Partnership) 52,412,989.91 -30,470.86 52,382,519.05

Ningbo Kaichen Huamei Equity Investment

Fund Partnership (Limited Partnership) 199,528,847.52 516,198.50 200,045,046.02

Xuchang Chenming Paper Co., Ltd. 5,994,545.96

Jiangxi Chenming Port Co., Ltd. 1,690,359.66 -521,745.21 1,168,614.45

Chenming (Qingdao) Asset Management

Co., Ltd. 8,669,491.17 -6,654.56 8,662,836.61

Goldtrust Futures Co., Ltd. 192,732,957.71 509,191.24 193,242,148.95

Guangdong Nanyue Bank Co., Ltd 2,800,091,481.01 124,059,754.41 2,924,151,235.42

Subtotal 3,255,126,126.98 124,526,273.52 3,379,652,400.50 5,994,545.96

Total 3,606,339,023.74 42,000,000.00 120,115,440.96 1,200,000.00 3,767,254,464.70 5,994,545.96


X Financial Report


11. Other non-current financial assets

Unit: RMB


Equity instrument investments 147,445,653.55 147,445,653.55

Total 147,445,653.55 147,445,653.55

12. Investment properties

(1) Investment properties under the cost method


Unit: RMB

ItemHousing and

building structure Land use rightsConstruction

in progress Total

I. Original carrying amount1 Opening balance 5,433,710,034.39 5,433,710,034.392. Increase for the period 188,223,636.73 188,223,636.73 Transferred from fixed assets 188,223,636.73 188,223,636.733. Closing balance 5,621,933,671.12 5,621,933,671.12

II. Accumulated depreciation and accumulated amortisation1. Opening balance 351,347,741.28 351,347,741.282. Increase for the period 72,208,415.14 72,208,415.14

(1) Provision or amortisation 62,862,063.94 62,862,063.94(2) Transferred from inventories/

fixed assets/construction in progress 9,346,351.20 9,346,351.20

3. Closing balance 423,556,156.42 423,556,156.42III. Carrying amount

1. Closing carrying amount 5,198,377,514.70 5,198,377,514.702. Opening carrying amount 5,082,362,293.11 5,082,362,293.11

13. Fixed assets

Unit: RMB


Fixed assets 38,215,983,514.51 34,439,935,032.69

Total 38,215,983,514.51 34,439,935,032.69


X Financial Report


13. Fixed assets (Cont’d)

(1) Particulars of fixed assets

Unit: RMB

ItemHousing and

building structureMachinery and

equipmentTransportation

equipment

Electronic equipment and others Total

I. Original carrying amount:1. Opening balance 9,941,580,880.78 39,482,080,460.52 351,029,607.21 398,368,057.18 50,173,059,005.692. Increase for the period 1,071,404,086.53 4,039,267,399.98 703,446.29 2,283,209.99 5,113,658,142.79

(1) Acquisition 22,691,006.68 18,937,890.61 418,490.17 1,344,019.11 43,391,406.57(2) Transferred from construction in progress 1,048,713,079.85 4,020,329,509.37 284,956.12 939,190.88 5,070,266,736.22

3. Decrease for the period 299,507,564.48 12,375,048.76 23,948,959.40 521,394.19 336,352,966.83(1) Disposal or retirement 111,283,927.75 12,375,048.76 23,948,959.40 521,394.19 148,129,330.10(2) Transferred into investment properties 188,223,636.73 188,223,636.73

4. Closing balance 10,713,477,402.83 43,508,972,811.74 327,784,094.10 400,129,872.98 54,950,364,181.65II. Accumulated depreciation

1. Opening balance 1,796,330,000.77 13,297,091,535.53 188,896,834.23 257,770,900.14 15,540,089,270.672. Increase for the period 139,085,677.89 878,544,680.41 13,206,342.46 7,587,382.57 1,038,424,083.33

(1) Provision 139,085,677.89 878,544,680.41 13,206,342.46 7,587,382.57 1,038,424,083.333. Decrease for the period 15,015,295.16 5,361,980.49 16,525,427.54 264,686.00 37,167,389.19

(1) Disposal or retirement 5,668,943.96 5,361,980.49 16,525,427.54 264,686.00 27,821,037.99(2) Depreciation for transfer into investment

properties 9,346,351.20 9,346,351.204. Closing balance 1,920,400,383.50 14,170,274,235.45 185,577,749.15 265,093,596.71 16,541,345,964.81

III. Provision for impairment1. Opening balance 27,808,852.79 157,777,407.54 13,889.13 7,434,552.87 193,034,702.332. Closing balance 27,808,852.79 157,777,407.54 13,889.13 7,434,552.87 193,034,702.33

IV. Carrying amount1. Closing carrying amount 8,765,268,166.54 29,180,921,168.75 142,192,455.82 127,601,723.40 38,215,983,514.512. Opening carrying amount 8,117,442,027.22 26,027,211,517.45 162,118,883.85 133,162,604.17 34,439,935,032.69


X Financial Report


13. Fixed assets (Cont’d)

(2) Particulars of temporarily idle fixed assets

Unit: RMB

ItemOriginal

carrying amountAccumulated depreciation

Provision for impairment

Carrying amount Remark

Housing and building structure 95,571,926.29 15,334,914.47 1,420,368.96 78,816,642.86Machinery and equipment 1,041,587,310.23 504,133,469.38 102,416,418.00 435,037,422.85Transportation equipment 12,200.00 10,980.00 – 1,220.00Electronic equipment and others 781,694.91 669,098.40 2,594.47 110,002.04

Total 1,137,953,131.43 520,148,462.25 103,839,381.43 513,965,287.75

(3) Particulars of fixed assets without obtaining property right certificates

Unit: RMB

Item Carrying amount

Reason for not yet obtaining property

right certificates

Housing and building structure (Zhanjiang Chenming Pulp & Paper Co., Ltd.) 1,291,450,246.23 HandlingHousing and building structure (Huanggang Chenming Pulp & Paper Co., Ltd.) 1,274,008,741.37 HandlingHousing and building structure (Shouguang Meilun Paper Co., Ltd.) 412,535,443.46 HandlingHousing and building structure (Jilin Chenming Paper Co., Ltd.) 396,097,436.98 HandlingHousing and building structure (Jiangxi Chenming Paper Co., Ltd.) 213,987,044.09 HandlingHousing and building structure (Shandong Chenming Paper Holdings Limited) 108,006,195.95 HandlingHousing and building structure (Shandong Chenming Investment Limited) 86,519,304.60 HandlingHousing and building structure (Wuhan Chenming Hanyang Paper Holdings Co., Ltd.) 80,441,254.26 Handling

Total 3,863,045,666.94


X Financial Report


14. Construction in progress

Unit: RMB


Construction in progress 589,320,449.78 5,467,321,406.80Materials for project 8,730,717.09 8,801,522.15

Total 598,051,166.87 5,476,122,928.95

(1) Particulars of construction in progress

Unit: RMB


Item Book balanceProvision for

impairment Carrying amount Book balanceProvision for

impairment Carrying amount

Upgrading and renovation of back pressure unit of captive power plant 249,589,135.27 249,589,135.27 263,626,439.57 263,626,439.57New annual 200,000 tonne of fly ash cement ceramsite production project 54,186,705.23 54,186,705.23 51,767,628.00 51,767,628.00High-end cultural paper intelligent warehouse project 61,116,179.15 61,116,179.15 179,056,842.38 179,056,842.38Meilun modification project 17,026,765.39 17,026,765.39 31,858,373.50 31,858,373.50Huanggang pulp production project 93,052,147.95 93,052,147.95 4,601,844,646.27 4,601,844,646.27Huanggang biomass power generation project 193,548,348.79 193,548,348.79Technological modification project in the headquarter 32,686,178.75 32,686,178.75 35,229,753.85 35,229,753.85Others 111,351,796.21 29,688,458.17 81,663,338.04 139,914,114.85 29,524,740.41 110,389,374.44

Total 619,008,907.95 29,688,458.17 589,320,449.78 5,496,846,147.21 29,524,740.41 5,467,321,406.80


X Financial ReportV

II.

No

tes

to it

ems

of

the

cons

olid

ated

fin

anci

al s

tate

men

ts (C

ont’ d

)

14.

Co

nstr

uctio

n in

pro

gre

ss (C

ont’ d

)

(2)

Cha

nges

in m

ater

ial c

ons

truc

tion

in p

rog

ress

pro

ject

s fo

r th

e p

erio

d

Uni

t: R

MB

Projec

t nam

eBu

dget

Openi

ng bal

ance

Increa

se for

the

perio

d

Transf

er to

fixed a

sset

for th

e perio

dOth

er ded

uction

s for

the p

eriod

Closin

g bal

ance

Accum

ulated

inv

estme

nt to

budg

etCo

nstruc

tion

in prog

ress

Accum

ulated

cap

italise

d inte

rest

Of wh

ich:

capital

ised

interes

t amoun

t for

the p

eriod

Capit

alisatio

n rat

e of th

e inte

rest am

ount

for th

e perio

dSo

urce o

f fund

Upgra

ding a

nd ren

ovation

of bac

k pres

sure u

nit of

capt

ive po

wer p

lant (H

eadqua

rters)

274,00

0,000

263,62

6,439.

571,2

59,640

.5615,

296,94

4.86

249,58

9,135.

2791%

92%822

,004.9

8Se

lf-rais

ed and

borro

wings

New a

nnual 2

00,000

tonne

of fly

ash ce

ment

cera

msite

produc

tion pr

oject

76,000

,000

51,767

,628.0

02,4

19,077

.2354,

186,70

5.23

71%71%

Self-r

aised

High-e

nd cul

tural p

aper (M

eilun)

2,261,

000,00

0179

,056,8

42.38

14,449

,141.5

4132

,389,8

04.77

61,116

,179.1

591%

99%64,

161,97

1.31

Self-r

aised

andbo

rrowin

gsHu

anggan

g Chen

ming F

orest a

nd Pa

per Int

egratio

n P

roject (

Pulpin

g Proje

ct) (Hu

anggan

g Chen

ming)

4,785,

000,00

04,6

01,844

,646.2

7192

,849,1

30.43

4,701,

641,62

8.75

93,052

,147.9

5101

%99%

241,11

8,047.

0017,

272,97

4.15

9%Se

lf-rais

ed and

borro

wings

Bioma

ss po

wer g

enerat

ion pr

oject (

southe

rn dis

trict)

(Hu

anggan

g Chen

ming)

205,00

0,000

193,54

8,348.

794,4

19,515

.45197

,967,8

64.24

-0.00

97%100

%Se

lf-rais

ed

Memb

rane tr

eatme

nt proje

ct (Zh

anjian

g Chen

ming)

120,00

0,000

25,833

,751.0

723,

189,96

4.24

2,643,

786.83

84%95%

Self-r

aised

Total

7,721,

000,00

05,3

15,677

,656.0

8215

,396,5

05.21

5,055,

189,26

2.00

15,296

,944.8

6460

,587,9

54.43

––

306,10

2,023.

2917,

272,97

4.15

–


X Financial Report


14. Construction in progress (Cont’d)

(3) Particulars of provision for construction in progress impairment

Unit: RMB

ItemAmount for the

periodReason for the

provision

Other projects of Huanggang Chenming 163,717.76 Project modification

Total 163,717.76 –

Other explanation

(4) Materials for project

Unit: RMB


Item Book balanceImpairment

provision Carrying amount Book balanceImpairment

provision Carrying amount

Special materials 8,730,717.09 8,730,717.09 8,801,522.15 8,801,522.15

Total 8,730,717.09 – 8,730,717.09 8,801,522.15 – 8,801,522.15


X Financial Report


15. Right-of-use assets

Unit: RMB

Item Land use rights Total

I. Original carrying amount:1. Opening balance 163,334,964.90 163,334,964.902. Closing balance 163,334,964.90 163,334,964.90

II. Accumulated depreciation1. Opening balance 11,193,082.85 11,193,082.852. Increase for the period 2,691,472.70 2,691,472.70

(1) Provision 2,691,472.70 2,691,472.703. Closing balance 13,884,555.55 13,884,555.55

III. Carrying amount1. Closing carrying amount 149,450,409.35 149,450,409.352. Opening carrying amount 152,141,882.05 152,141,882.05


X Financial Report


16. Intangible assets

(1) Particulars of intangible assetsUnit: RMB

Item Land use rights SoftwareCertificates of

third party right Total

I. Original carrying amount1. Opening balance 2,176,207,105.75 26,352,090.74 15,895,213.33 2,218,454,409.822. Increase for the period 72,000.00 72,000.00

(1) Acquisition 72,000.00 72,000.003. Decrease for the period 107,209,008.00 107,209,008.00

(1) Disposal 107,209,008.00 107,209,008.004. Closing balance 2,068,998,097.75 26,424,090.74 15,895,213.33 2,111,317,401.82

II. Accumulated amortisation1. Opening balance 407,497,707.25 22,891,289.24 7,003,508.82 437,392,505.312. Increase for the period 21,157,836.48 663,165.08 2,649,202.26 24,470,203.82

(1) Provision 21,157,836.48 663,165.08 2,649,202.26 24,470,203.823. Decrease for the period 9,662,821.09 9,662,821.09

(1) Disposal 9,662,821.09 9,662,821.094. Closing balance 418,992,722.64 23,554,454.32 9,652,711.08 452,199,888.04

III. Provision for impairmentIV. Carrying amount

1. Closing carrying amount 1,650,005,375.11 2,869,636.42 6,242,502.25 1,659,117,513.782. Opening carrying amount 1,768,709,398.50 3,460,801.50 8,891,704.51 1,781,061,904.51

17. Goodwill

(1) Original carrying amount of goodwillUnit: RMB

Name of investee or item generating goodwillOpening balance

Increase for the period

Decrease for the period

Closing balance

Shandong Chenming Panels Co., Ltd. 5,969,626.57 5,969,626.57Jilin Chenming Paper Co., Ltd. 14,314,160.60 14,314,160.60

Total 20,283,787.17 20,283,787.17

(2) Provision for impairment of goodwillUnit: RMB

Name of investee or item generating goodwillOpening balance



Closing balance

Jilin Chenming Paper Co., Ltd. 14,314,160.60 14,314,160.60

Total 14,314,160.60 14,314,160.60


X Financial Report


18. Long-term prepaid expenses

Unit: RMB

ItemOpening balance


Amortisation for the period

Other deductions

Closing balance

Woodland expenses 9,642,224.60 302,898.00 9,339,326.60Railway expenses 16,071,459.93 599,814.96 15,471,644.97Other expenses 22,489,724.18 4,176,000.00 527,201.82 26,138,522.36

Total 48,203,408.71 4,176,000.00 1,429,914.78 50,949,493.93

19. Deferred income tax assets/deferred income tax liabilities

(1) Deferred income tax assets before offsettingUnit: RMB


Item

Deductible temporary difference

Deferred income tax

assets

Deductible/taxable temporary

difference

Deferred income tax assets/

liabilities

Deferred income tax assets:Provision for impairment of assets 2,041,447,469.67 482,105,135.45 1,791,356,735.71 417,688,820.31Unrealised profit arising from intra-group transactions 75,054,127.24 18,763,531.81 164,089,227.26 41,022,306.82Deductible loss 2,343,752,044.37 366,327,959.09 2,243,481,924.83 344,125,106.67Outstanding payables 470,036,072.19 72,746,587.79 446,580,396.87 68,163,018.91Deferred income 111,566,555.62 20,612,480.91 116,165,951.14 21,443,378.33

Subtotal 5,041,856,269.09 960,555,695.05 4,761,674,235.81 892,442,631.04

Debt reconstructing 5,644,502.36 1,411,125.59

Subtotal 5,644,502.36 1,411,125.59

(2) The breakdown of unrecognised deferred income tax assetsUnit: RMB


Deductible temporary difference 293,607,004.97 352,057,221.14Deductible loss 661,787,456.93 521,737,724.53

Total 955,394,461.90 873,794,945.67


X Financial Report


19. Deferred income tax assets/deferred income tax liabilities (Cont’d)

(3) Expiry of deductible loss of unrecognised deferred income tax assets falls in the periods as followsUnit: RMB

Year Closing amount Opening amount Remark

2020 – 674,989.712021 185,647.61 185,647.612022 11,628,813.14 11,628,813.142023 163,280,498.87 164,859,774.532024 338,716,266.07 344,388,499.542025 147,976,231.24 –

Total 661,787,456.93 521,737,724.53 –

20. Other non-current assets

Unit: RMB


ItemBook

balanceImpairment

provisionCarrying amount

Book balance

Impairment provision

Carrying amount

Prepayments for land-transferring fee 101,130,000.00 101,130,000.00 101,130,000.00 101,130,000.00Prepayments for engineering 61,915,754.57 61,915,754.57 47,430,952.09 47,430,952.09Prepayments for properties 9,800,000.00 9,800,000.00 9,800,000.00 9,800,000.00Prepayments for equipment 19,350,298.70 19,350,298.70 15,514,874.58 15,514,874.58Prepayments for purchase of equity interest 176,000,000.00 176,000,000.00 –

Total 368,196,053.27 – 368,196,053.27 173,875,826.67 – 173,875,826.67

21. Short-term borrowings

(1) Classification of short-term borrowingsUnit: RMB


Pledged borrowings 277,536,675.69 859,312,833.51Mortgage borrowings 180,000,000.00 180,000,000.00Guaranteed borrowings 8,006,661,333.87 7,082,088,423.98Credit borrowings 8,441,863,225.44 7,174,060,275.17Discounted borrowings 21,648,250,000.00 21,587,694,481.53

Total 38,554,311,235.00 36,883,156,014.19


X Financial Report


22. Bills payable

Unit: RMB

Classification Closing balance Opening balance

Commercial acceptance bills 382,897,538.49 625,325,798.18Bank acceptance bills 2,364,709,222.68 889,722,407.82

Total 2,747,606,761.17 1,515,048,206.00

23. Accounts payable

(1) Particulars of accounts payableUnit: RMB


Loans 3,501,525,952.77 3,393,786,063.51Payment for engineering 151,196,271.94 408,694,349.00Payment for equipment 357,086,520.95 312,292,221.48Service expense 165,525,980.81 199,838,288.95Others 69,571,698.83 36,476,659.04

Total 4,244,906,425.30 4,351,087,581.98

(2) Significant advance receipts for over 1 yearUnit: RMB

Item Closing balance Reasons

Guangxi Construction Engineering Group No. 1 Installation Co., Ltd. 31,311,231.15

Quality guarantee deposit for engineering

Beijing Guodian Futong Science And Development Co., Ltd. 26,630,150.00Quality guarantee

deposit for engineering

Omya Haiming (Nanchang) Chemical Co. Ltd. 16,000,000.00Quality guarantee

deposit for engineeringChina Energy Engineering Group Guangzhou Electric Power

Design 14,128,415.00Quality guarantee

deposit for engineeringFujian Xinze Environmental Protection Equipment and

Engineering Co., Ltd. 13,001,120.40Quality guarantee

deposit for engineering

Total 101,070,916.55 –

24. Contract liabilities

Unit: RMB


Deposits received 1,230,606,297.46 968,082,063.13

Total 1,230,606,297.46 968,082,063.13


X Financial Report


25. Staff remuneration payables

(1) Particulars of staff remuneration payablesUnit: RMB

ItemOpening balance



Closing balance

I. Short-term remuneration 189,006,380.72 632,598,237.29 597,988,645.16 223,615,972.85II. Retirement benefit plan – defined contribution scheme 1,223,502.80 64,951,329.89 58,372,687.09 7,802,145.60

Total 190,229,883.52 697,549,567.18 656,361,332.25 231,418,118.45

(2) Particulars of short-term remunerationUnit: RMB

ItemOpening balance



Closing balance

1. Salaries, bonuses, allowance and subsidies 120,634,999.88 509,315,990.09 477,709,438.90 152,241,551.072. Staff welfare 14,502,279.87 14,502,279.873. Social insurance premium 1,871,932.30 33,348,186.94 33,097,202.50 2,122,916.74

Of which: Medical insurance premium 840,248.82 30,482,685.63 31,165,115.14 157,819.31Work-related injury insurance premium 23,069.88 1,365,767.12 963,528.54 425,308.46Maternity insurance premium 1,008,613.60 1,499,734.19 968,558.82 1,539,788.97

4. Housing provident funds 8,856,543.62 48,333,531.86 44,866,200.88 12,323,874.605. Union funds and workers’ education 35,831,023.93 16,175,524.42 14,301,359.06 37,705,189.296. Other short-term remuneration 21,811,880.99 10,922,724.11 13,512,163.95 19,222,441.15

Total 189,006,380.72 632,598,237.29 597,988,645.16 223,615,972.85

(3) Defined contribution planUnit: RMB

ItemOpening balance



Closing balance

1. Basic pension insurance 1,033,762.42 62,119,798.36 55,961,336.45 7,192,224.332. Unemployment insurance 189,740.38 2,831,531.53 2,411,350.64 609,921.27

Total 1,223,502.80 64,951,329.89 58,372,687.09 7,802,145.60


X Financial Report


26. Taxes payable

Unit: RMB


Enterprise income tax 241,770,346.42 166,389,232.03Value added tax 60,572,555.84 81,745,671.90Land use tax 10,658,837.91 8,206,677.02Property tax 24,362,303.63 8,239,300.78Urban maintenance and construction tax 3,421,307.00 5,844,684.79Educational surcharges and others 11,151,393.45 6,850,900.34Individual income tax 28,149,300.07 29,565,363.87Stamp duty 3,191,475.06 4,712,286.00

Total 383,277,519.38 311,554,116.73

27. Other payables

Unit: RMB


Interest payable 149,518,233.84 208,189,699.15Dividend payable 610,109,667.16Other payables 1,694,370,129.51 2,386,059,927.39

Total 2,453,998,030.51 2,594,249,626.54

(1) Interest payableUnit: RMB


Interest on borrowings 26,109,646.67 27,960,930.86Interest on corporate bonds 7,367,916.67 103,432,934.98Interest on medium-term notes 116,040,670.50 76,795,833.31

Total 149,518,233.84 208,189,699.15


X Financial Report


27. Other payables (Cont’d)

(2) Dividend payableUnit: RMB


A shares 256,449,200.77B shares 103,543,930.17H shares 77,440,462.80Preference shares 172,676,073.42

Total 610,109,667.16

(3) Other payables

1) Other payables by natureUnit: RMB


Open credit 507,890,103.31 1,287,822,732.06Deposit 417,858,566.67 451,756,402.26Accrued expenses 427,320,371.12 506,095,837.14Equity incentive 226,860,000.00Others 114,441,088.41 140,384,955.93

Total 1,694,370,129.51 2,386,059,927.39

2) Significant other payables for over 1 yearUnit: RMB

Item Closing balance Reasons

NINE DRAGONS DAWEI HOLDINGS CO., LTD. 30,000,000.00 DepositSHOUGUANG LONGYUAN PAPER COATING CO., LTD. 9,250,000.00 DepositSTATE-OWNED SHOUGUANG QINGSHUIPO FARM 8,800,000.00 Open creditZHEJIANG TSINGSHAN STEEL PIPE CO., LTD. 5,860,000.00 DepositWENZHOU DONGDA MINE CONSTRUCTION

ENGINEERING CO., LTD. 5,450,000.00 Deposit

Total 59,360,000.00 –


X Financial Report


28. Non-current assets due within one year

Unit: RMB


Long-term receivables due within one year 3,963,363,135.83 2,520,582,051.43Long-term payables due within one year 1,968,889,601.58 2,238,647,651.02Lease liabilities due within one year 4,606,717.58 4,606,717.58Bonds payable due within one year 899,122,500.00Medium-term notes due within one year 1,000,000,000.00

Total 6,936,859,454.99 5,662,958,920.03

29. Other current liabilities

Unit: RMB


Short-term bonds payable 150,686,164.01 222,402,500.00

Total 150,686,164.01 222,402,500.00

30. Long-term borrowings

(1) Types of long-term borrowings

Unit: RMB


Pledge borrowings 74,823,068.83Secured borrowings 4,789,105,773.48 5,110,291,847.19Guarantee borrowings 5,232,927,028.33 5,695,114,793.03Credit borrowings 950,692,035.94 780,692,035.94Less: Long-term borrowings due within 1 year 3,963,363,135.83 2,520,582,051.43

Total 7,009,361,701.92 9,140,339,693.56


X Financial Report


31. Bonds payable

(1) Bonds payable

Unit: RMB


17 Chenming bond 01- Chenming Paper 89,943,750.00 89,070,000.0018 Chenming bond 01- Chenming Paper 350,000,000.00Chenming USD Bonds 1,188,190,442.59 1,169,200,909.49

Total 1,628,134,192.59 1,258,270,909.49

(2) Increase/decrease in bonds payable (excluding other financial instruments such as preference shares and perpetual bonds classified as financial liabilities)

Unit: RMB

Name of bond Par value Date of issue Term Amount Opening balance

17 Chenming bond 01 – Chenming Paper 1,200,000,000.00 2017/8/22 5 years 1,198,200,000.00 89,070,000.0018 Chenming bond 01 – Chenming Paper 350,000,000.00 2020/6/1 5 years 350,000,000.00Chenming USD Bonds 1,137,120,600.00 2019/8/6 2.6 years 1,125,276,863.46 1,169,200,909.49

Total 2,687,120,600.00 2,673,476,863.46 1,258,270,909.49

(Cont’d)

Name of bondIssue during

the yearInterest at par value

Amortisation of premium/

discountRedemption

during the yearClosing balance

17 Chenming bond 01 – Chenming Paper 873,750.00 89,943,750.0018 Chenming bond 01- Chenming Paper 350,000,000.00 350,000,000.00Chenming USD Bonds 16,768,832.50 2,220,700.60 1,188,190,442.59

Total 350,000,000.00 16,768,832.50 3,094,450.60 1,628,134,192.59


X Financial Report


32. Lease liabilities

Unit: RMB


Lease payments payable 90,539,867.03 90,539,867.03Less: Unrecognised financing expenses 25,661,379.55 26,236,020.80

Subtotal 64,878,487.48 64,303,846.23

Less: Lease liabilities due within one year 4,606,717.58 4,606,717.58

Total 60,271,769.90 59,697,128.65

33. Long-term payables

Unit: RMB


Long-term payables 2,748,780,858.47 3,321,535,538.94

Total 2,748,780,858.47 3,321,535,538.94

(1) By nature

Unit: RMB


Retention for the financial leasing operations 76,000,000.00 160,190,103.51China Development Bank Special funds 517,500,000.00 595,000,000.00Financial leasing 4,124,170,460.05 4,804,993,086.45

Subtotal 4,717,670,460.05 5,560,183,189.96

Less: Long-term payables due within 1 year 1,968,889,601.58 2,238,647,651.02

Total 2,748,780,858.47 3,321,535,538.94


X Financial Report


34. Provision

Unit: RMB

ItemClosing balance



Opening balance Reason

Provision 325,259,082.28 325,259,082.28Losses from

Arjo’s lawsuit

Total 325,259,082.28 325,259,082.28 –

35. Deferred income

Unit: RMB

ItemOpening balance



Closing balance Reason

Government grants 1,771,013,335.11 28,360,000.00 106,871,499.81 1,692,501,835.30 Financial provision

Total 1,771,013,335.11 28,360,000.00 106,871,499.81 1,692,501,835.30 –

Items in respect of government grants:

Unit: RMB

Liabilities itemOpening balance

New grants for the period

Include in non-operating

income for the period

Include in other income for the period

Amount charged

against costexpenses

Other changes

Closing balance

Asset-related/income-

related

Project fund for National technological support scheme 1,452,525.00 82,350.00 1,370,175.00 Asset-relatedSewage treatment and water conservation reconfiguration project 63,274,136.71 1,588,476.44 61,685,660.27 Asset-relatedFinancial grants for technological modification project 168,182,448.80 28,360,000.00 6,391,903.86 190,150,544.94 Asset-relatedSubsidy funds for environmental protection 700,228,305.19 24,595,985.84 675,632,319.35 Asset-relatedLogistics park project 51,960,000.00 51,960,000.00 Asset-relatedZhanjiang integrated forestry, pulp and paper project 67,047,201.50 10,098,654.93 56,948,546.57 Asset-relatedHuanggang pulp-forestry-paper project 681,564,072.66 11,359,401.20 670,204,671.46 Asset-relatedOthers 37,304,645.25 794,727.54 36,509,917.71 Asset-related

Total 1,771,013,335.11 28,360,000.00 54,911,499.81 51,960,000.00 1,692,501,835.30


X Financial Report


36. Other non-current liabilities

Unit: RMB


Medium-term notes 3,384,489,390.18 3,042,841,328.86Less: Other non-current liabilities due within one year 1,000,000,000.00

Total 2,384,489,390.18 3,042,841,328.86

37. Share capital

Unit: RMB

Increase/decrease during the year (+/-)

Opening balance New issue Bonus issue

Shares converted from

reserves Others SubtotalClosing balance

Total number of shares 2,904,608,200.00 79,600,000.00 79,600,000.00 2,984,208,200.00

38. Other equity instruments

(1) Preference shares, perpetual bonds and other financial instruments outstanding at the end of the period

ItemOpening balance

Increase forthe period

Decrease forthe period

Closing balance

Perpetual bonds 2,988,000,000.00 2,988,000,000.00Preference shares 4,477,500,000.00 4,477,500,000.00

Total 7,465,500,000.00 7,465,500,000.00

(2) Changes in perpetual bonds outstanding at the end of the period

Unit: RMB

Outstanding financial instrumentsOpening balance



Closing balance

17 Lu Chenming MTN001 996,000,000.00 996,000,000.0017 Lu Chenming MTN002 1,992,000,000.00 1,992,000,000.00

Total 2,988,000,000.00 2,988,000,000.00


X Financial Report


38. Other equity instruments (Cont’d)

(3) Changes in perpetual bonds outstanding at the end of the period

Outstanding financial instrumentsOpening balance



Closing balance

Chenming You 01 2,238,750,000.00 2,238,750,000.00Chenming You 02 999,000,000.00 999,000,000.00Chenming You 03 1,239,750,000.00 1,239,750,000.00

Total 4,477,500,000.00 4,477,500,000.00

39. Capital reserves

Unit: RMB

ItemOpening balance



Closing balance

Capital premium (share premium) 4,416,363,920.09 177,314,104.00 4,593,678,024.09Other capital reserves 670,322,507.21 670,322,507.21

Total 5,086,686,427.30 177,314,104.00 5,264,000,531.30

40. Treasury shares

Unit: RMB

ItemOpening balance

Increase forthe period

Decrease forthe period

Closing balance

Restricted treasury shares 226,860,000.00 226,860,000.00

Total 226,860,000.00 226,860,000.00

41. Other comprehensive income

Unit: RMB

During the period

ItemOpening balance

Incurred before income tax

for the period

Less: Transferred from other

comprehensive income in prior

periods to profit or loss during

the period

Less: Transferred from other

comprehensive income in prior

periods to retained earnings during the period

Less: Income tax expenses

Attributable to parent company

after tax

Attributable to minority

shareholders after tax

Closing balance

Other comprehensive income to be reclassified to profit or loss in subsequent periodsExchange differences on translation of foreign operations -879,452,135.10 -100,282,332.31 -100,282,332.31 -979,734,467.41

Total other comprehensive income -879,452,135.10 -100,282,332.31 -100,282,332.31 -979,734,467.41


X Financial Report


42. General risk reserves

ItemOpening balance



Closing balance

General risk reserves 74,122,644.20 74,122,644.20

Total 74,122,644.20 74,122,644.20

43. Surplus reserves

Unit: RMB

ItemOpening balance



Closing balance

Statutory surplus reserves 1,212,009,109.97 1,212,009,109.97

Total 1,212,009,109.97 1,212,009,109.97

44. Retained profit

Unit: RMB

Item The period

The prior period(the same period

last year)

Retained profit as at the end of the prior year before adjustment 9,306,269,617.38 9,107,422,690.85Accumulated adjustments to retained profit as at the beginning

of the year (increase “+”, decrease “-”)Retained profit as at the beginning of the year after adjustment 9,306,269,617.38 9,107,422,690.85Plus: Net profit for year attributable to shareholders of the parent company 516,326,703.48 509,795,572.29Less: Transfer of statutory surplus reserves Ordinary dividend payable 437,433,593.74 697,105,968.00 Preferred shares interest payable 270,776,073.42 377,169,767.52

Retained profit as at the end of the year 9,114,386,653.70 8,542,942,527.62


X Financial Report


45. Revenue and operating cost

Unit: RMB

Amount for the period Amount for the prior periodItem Revenue Costs Revenue Costs

Principal activities 12,956,373,458.78 9,705,685,293.06 13,127,389,053.48 9,644,049,075.24Other activities 643,432,307.08 479,614,740.25 221,259,060.22 110,048,724.58

Total 13,599,805,765.86 10,185,300,033.31 13,348,648,113.70 9,754,097,799.82

Information related to revenue:

Unit: RMB

Category of contractMachine-made paper segment

Financial segment

Other segments Total

Type of goodsMachine-made paper 11,558,358,972.70 11,558,358,972.70Financial leasing 523,141,507.84 523,141,507.84Electricity and steam 76,551,167.17 1,284,686.67 77,835,853.84Construction materials 178,629,808.17 178,629,808.17Paper chemicals 65,927,709.45 65,927,709.45Hotel services 7,284,272.63 7,284,272.63Others 1,080,801,337.95 43,572,514.54 64,253,788.74 1,188,627,641.23

Total 12,781,639,187.27 566,714,022.38 251,452,556.21 13,599,805,765.86


X Financial Report


46. Taxes and surcharges

Unit: RMB

ItemAmount for the period

Amount for the prior period

Urban maintenance and construction tax 16,351,064.21 33,491,970.50Educational surcharges 11,385,806.59 30,083,061.41Property tax 35,765,283.62 25,991,020.83Land use tax 15,431,134.06 17,485,547.38Vehicle and vessel tax 12,010.68 53,845.71Stamp duty 13,063,555.43 10,950,170.18Water engineering funds 849,304.03 1,634,705.86Environmental tax 7,919,659.65 4,945,936.66Water resource tax 6,270,279.94 9,852,286.53

Total 107,048,098.21 134,488,545.06

47. Selling and distribution expenses

Unit: RMB



Wages and surcharges 58,686,281.82 61,585,417.90Depreciation expenses 6,122,536.00 6,288,587.94Office expenses 1,843,778.51 1,758,975.11Transportation expenses 486,328,202.98 425,245,830.59Selling commissions 21,030,123.34 5,725,354.65Cargo handling charges 8,233,465.18 7,716,321.23Travel expenses 9,122,159.33 14,946,381.33Business hospitality expenses 21,137,948.35 28,199,788.34Warehouse expenses 1,116,656.86 1,080,149.47Rental expenses 3,513,698.23 4,019,981.96Others 35,607,569.75 34,018,168.95

Total 652,742,420.35 590,584,957.47


X Financial Report


48. General and administrative expenses

Unit: RMB



Wages and surcharges 158,698,083.16 118,518,202.91Welfare expenses 29,416,491.43 27,556,239.75Insurance premium 13,706,761.09 14,052,377.28Depreciation expenses 58,348,214.94 114,171,603.76Waste disposal expenses 6,215,674.32 5,411,881.45Hospitality expenses 40,625,251.74 38,283,517.05Amortisation of intangible assets 22,805,226.17 24,242,384.25Production interruption loss 59,359,808.22 69,899,210.78Repair fees 16,847,259.15 15,566,475.96Others 85,964,475.11 134,715,506.06

Total 491,987,245.33 562,417,399.25

49. R&D expenses

Unit: RMB



Installation expenses 609,432.49 8,229,476.80Depreciation expenses 27,731,869.06 18,616,150.51Consumption of raw materials 198,168,322.21 181,729,065.27Consumption of semi-finished products 87,624,595.31 61,663,204.78Consumption of auxiliary materials 78,527,925.39 41,870,386.58Travel expenses 1,574.18Wages and surcharges 69,924,624.21 52,643,872.99Welfare expenses 3,526,275.77 3,128,695.00Housing provident funds 3,787,143.40 3,507,430.88Insurance premium 8,279,960.27 8,344,818.02Union funds 391,146.46 165,815.82Utilities 69,857,222.28 50,274,197.98Other expenses 128,630.04 1,309,027.25

Total 548,557,146.89 431,483,716.06


X Financial Report


50. Finance expenses

Unit: RMB



Finance expenses 1,459,184,970.39 1,650,075,404.49Less: interest income 276,115,018.97 213,994,280.22Less: capitalised interest amount 19,684,809.62 73,319,125.19Foreign exchange gains and losses -1,552,952.90 -2,644,727.97Bank charges 184,385,373.56 156,731,452.69

Total 1,346,217,562.46 1,516,848,723.80

51. Other income

Unit: RMB



Government grants – amortised deferred income included in profit or loss 54,911,499.81 34,507,125.14Government grants – directly included in profit or loss 78,522,474.64 4,324,165.50

Total 133,433,974.45 38,831,290.64

52. Investment income

Unit: RMB



Income from long-term equity investments accounted for using the equity method 120,115,440.96 -9,467,172.97

Investment gain on disposal of long-term equity investments 16,778,042.01

Total 136,893,482.97 -9,467,172.97


X Financial Report


53. Gain on change in fair value

Unit: RMB

Source of gain on change in fair valueAmount for the period


Consumable biological assets measured at fair value -9,246,743.86 -1,883,064.80

Total -9,246,743.86 -1,883,064.80

54. Credit impairment loss

Unit: RMB



Bad debt loss of accounts receivable -257,855,903.60 -62,440,283.34

Total -257,855,903.60 -62,440,283.34

55. Loss on impairment of assets

Unit: RMB



Loss on inventory impairment and impairment loss of performance costs of contracts 83,464,107.59

Loss on construction in progress impairment -163,717.76

Total -163,717.76 83,464,107.59

56. Asset disposal income

Unit: RMB

Source of asset disposal incomeAmount for the period


Net income from disposal of non-current assets -4,705,886.89 22,823,551.43

Total -4,705,886.89 22,823,551.43


X Financial Report


57. Non-operating income

Unit: RMB



Amounts included in extraordinary

gains and losses for the period

Government grants 633,778,881.76 227,700,148.23 633,778,881.76Others 8,621,236.02 9,772,444.74 8,621,236.02

Total 642,400,117.78 237,472,592.97 642,400,117.78

58. Non-operating expenses

Unit: RMB



Amounts included in extraordinary

gains and losses for the period

Donation 5,144,077.88 3,041,000.00 5,144,077.88Loss on destroyed and scrapped non-current assets 510,335.35 1,207,252.11 510,335.35Others 3,353,130.95 801,876.08 3,353,130.95

Total 9,007,544.18 5,050,128.19 9,007,544.18

59. Income tax expenses

(1) Particulars of income tax expenses

Unit: RMB



Income tax expenses for the period 306,073,252.16 264,288,265.75Deferred income tax expenses -68,113,064.01 -138,410,446.13

Total 237,960,188.15 125,877,819.62


X Financial Report


60. Items on statements of cash flow

(1) Cash received relating to other operating activities

Unit: RMB



Finance support fund 207,271,356.40 184,083,293.99Interest income 202,247,580.26 213,994,280.22Open credit, and income from default penalty and fine 97,478,845.77 199,443,495.78Net return of principal receivables relating to finance lease business 1,056,112,435.52 1,700,675,170.98

Total 1,563,110,217.95 2,298,196,240.97

(2) Cash paid relating to other operating activities

Unit: RMB



Expense and open credit 1,083,849,666.32 1,000,088,741.18

Total 1,083,849,666.32 1,000,088,741.18

(3) Cash received relating to other investing activities

Unit: RMB



Sales of right in Haiming 60,436,164.38Sales of right in Qingdao Logistics 37,399,937.28Sales of right in Industrial Logistics 31,361,866.40

Total 129,197,968.06

(4) Cash paid relating to other investing activities

Unit: RMB



Purchase of Goldtrust Futures equity interest 144,248,400.00Investment in Growth Driver Replacement 39,500,000.00Investment in Meite Environment 5,880,000.00Acquisition of equity in Taan Plastic 176,000,000.00

Total 176,000,000.00 189,628,400.00


X Financial Report


60. Items on statements of cash flow (Cont’d)

(5) Cash received relating to other financing activities

Unit: RMB



Short-term commercial paper 144,457,000.00 1,887,185,904.00Equipment financing 542,500,000.00 831,099,242.78Debt financing receivable 320,000,000.00 400,071,077.96Loan from the Finance Company 200,000,000.00Shandong Financial Assets Exchange borrowings 161,337,302.32Issuance of corporate bonds 350,000,000.00

Total 1,356,957,000.00 3,479,693,527.06

(6) Cash paid relating to other financing activities

Unit: RMB



Repayment of short-term commercial paper 190,000,000.00 2,820,000,000.00Repayment of matured bonds 900,000,000.00Repayment of interest on preference shares 98,100,000.00 98,100,000.00Repayment of equipment leaseback 1,304,243,353.95 1,400,052,857.83Increase in restricted bank deposits for the period 704,209,894.72 1,807,611,450.60Repayment of borrowings from Chenming Holdings 708,440,865.27 330,800,000.00Payment of equity in China Development Bank funds 77,500,000.00

Total 3,982,494,113.94 6,456,564,308.43


X Financial Report


61. Supplementary information on cash flow statement

(1) Supplementary information on cash flow statement

Unit: RMB

Supplementary informationAmount for the period


1. Reconciliation of net profit as cash flows from operating activities: – –Net profit 661,740,850.07 536,600,045.95Plus: Provision for impairment of assets 258,019,621.36 -83,464,107.59Depreciation of fixed assets, consumption of oil and gas assets,

depreciation of bearer biological assets 1,103,977,619.97 763,316,039.38Amortisation of intangible assets 24,470,203.82 26,402,322.31Amortisation of long-term prepaid expenses 1,429,914.78 5,347,583.69Loss on disposal of fixed assets, intangible assets and other long-

term assets (“-” denotes gain) 2,171,437.21 22,823,551.43Loss on changes in fair value (“-” denotes gain) -9,246,743.86 -1,883,064.80Finance expenses (“-” denotes gain) 1,439,500,160.77 1,516,848,723.80Investment loss (“-” denotes gain) -136,893,482.97 -9,467,172.97Decrease in deferred income tax assets (“-” denotes increase) -68,113,064.01 -155,056,230.40Increase in deferred income tax liabilities (“-” denotes increase) -1,411,125.59Decrease in inventories (“-” denotes increase) -927,140,737.58 -678,542,881.70Decrease in operating receivables (“-” denotes increase) -1,749,063,323.95 -282,017,217.78Increase in operating payables (“-” denotes decrease) 1,727,592,454.67 1,038,863,300.37Net cash flows from operating activities 2,327,033,784.68 2,699,770,891.69

2. Major investing and financing activities not involving cash settlements: – –

3. Net change in cash and cash equivalents: – –Closing balance of cash 2,213,282,630.76 2,009,063,231.38Less: Opening balance of cash 2,890,328,027.40 2,381,558,242.53Plus: Closing balance of cash equivalentsLess: Opening balance of cash equivalentsNet increase in cash and cash equivalents -677,045,396.64 -372,495,011.15

(2) Cash and cash equivalents composition

Unit: RMB


I. Cash 2,213,282,630.76 2,890,328,027.40Of which: Treasury cash 3,240,007.66 2,418,131.86

Bank deposit that can be used for payment at any time 2,210,042,623.10 2,887,909,895.54

III. Balance of cash and cash equivalent as at end of period 2,213,282,630.76 2,890,328,027.40

Other explanation:

Cash and cash equivalents did not include the restricted cash and cash equivalents used by the Company or subsidiaries within the Group.


X Financial Report


62. Assets with restricted ownerships or right to use

Unit: RMB

ItemClosing

carrying amount Reason for such restrictions

Monetary funds 18,718,827,955.87 As guarantee deposits for bank acceptance bills, letter of credit, and bank borrowings deposits, and deposit reserves

Bills receivable 624,106,580.39 As collateral for short-term borrowings, letters of guarantee and letters of credit

Fixed assets 9,433,004,439.14 As collateral for bank borrowings and long-term payablesIntangible assets 855,039,400.00 As collateral for bank borrowings and long-term payablesInvestment properties 4,581,606,847.89 As collateral for bank borrowings

Total 34,212,585,223.29 –

63. Foreign currency items

(1) Foreign currency items

Unit: RMB

ItemClosing foreign

currency balance Exchange rateClosing balance

in RMB

Monetary funds – –Of which: USD 63,132,986.23 7.0795 446,949,976.05 EUR 4,399,947.08 7.9610 35,027,978.69 HKD 36,519,300.65 0.9134 33,358,189.99 GBP 5,709.69 9.1501 52,244.22Accounts receivables – –Of which: USD 17,402,059.38 7.0795 123,197,879.41 EUR 3,299,963.79 7.9610 26,271,011.73Accounts payable – –Of which: USD 95,108,075.11 7.0795 673,317,617.77 EUR 11,053,728.26 7.9610 87,998,730.71 HKD 23,572,925.52 0.9134 21,532,453.09Other payables – –Of which: USD 1,406,229.34 7.0795 9,955,400.59 EUR 578,759.35 7.9610 4,607,503.19Short-term borrowings – –Of which: USD 129,772,338.60 7.0795 918,723,271.12Long-term borrowings – –Of which: USD 223,535,000.00 7.0795 1,582,516,032.50Non-current liabilities due within one yearOf which: USD 333,362,309.20 7.0795 2,360,038,467.98


X Financial Report


63. Foreign currency items (Cont’d)

(2) Explanation on overseas operating entities (including major overseas operating entities), which shall disclose their overseas principal places of business, functional currency and basis. Reasons shall be disclosed if there is any change in the functional currency.


No. Name of subsidiaryPrincipal placeof business

Place ofincorporation

Functionalcurrency

1 Chenming GmbH Hamburg, Germany Hamburg, Germany EUR2 Chenming Paper Korea Co., Ltd. Seoul, Korea Seoul, Korea KRW3 Chenming (HK) Limited Hong Kong, China Hong Kong, China USD4 Chenming International Co., Ltd. Los Angeles, USA Los Angeles, USA USD5 Chenming Paper Japan Co., Ltd. Tokyo, Japan Tokyo, Japan JPY6 Chenming Paper United States Co., Ltd. Los Angeles, USA Los Angeles, USA USD7 Chenming (Overseas) Limited Hong Kong, China Hong Kong, China USD8 Chenming (Singapore) Limited Singapore Singapore USD

64. Government grants

(1) General information of government grants

Unit: RMB

Type Amount Reporting itemAmount accounted for in profit or loss

National Science and Technology Support Program Project Funding

1,452,525.00 Deferred income 82,350.00

Sewage treatment and water saving reconstruction 63,274,136.71 Deferred income 1,588,476.44Financial subsidies for technical transformation

items196,542,448.80 Deferred income 6,391,903.86

Funding for environmental protection 700,228,305.19 Deferred income 24,595,985.84Industrial logistics park reconstruction

compensation51,960,000.00 Deferred income

Zhanjiang Forest Pulp & Paper Integration Item 67,047,201.50 Deferred income 10,098,654.93Huanggang Forest Pulp & Paper Integration Item 681,564,072.66 Deferred income 11,359,401.20Others 37,304,645.25 Deferred income 794,727.54Interest subsidy 1,087,500.00 Finance expenses 1,087,500.00Risk subsidy 19,980,000.00 Other income 19,980,000.00Tax return 62,377,043.64 Non-operating income,

and other income62,377,043.64

Enterprise reform and development subsidies 80,837,506.25 Non-operating income, and other income

80,837,506.25

Government awards 5,845,000.00 Non-operating income 5,845,000.00Afforestation subsidy 3,252,768.00 Other income 3,252,768.00VAT return 1,380,000.00 Other income 1,380,000.00Employment stabilization subsidy 3,725,651.13 Non-operating income,

and other income3,725,651.13

Relocation compensation balance 533,390,000.00 Non-operating income 533,390,000.00Special subsidy funds for environmental protection 1,000,000.00 Non-operating income 1,000,000.00Others 513,387.38 Non-operating income,

and other income513,387.38

Total 2,512,762,191.51 768,300,356.21


X Financial ReportV

III.

Cha

nge

in s

cop

e o

f co

nso

lidat

ion

1.

Dis

po

sal o

f su

bsi

dia

ries

Whe

ther

the

re is

loss

of c

ontr

ol o

ver

sub

sid

iarie

s in

a s

ingl

e d

isp

osal

√ Y

es □

No

Uni

t: R

MB

Name

of su

bsidi

ary

Cons

iderat

ionof

dispo

sal o

f eq

uity i

nteres

t

Share

holdi

ng of

dis

posa

l of

equit

y inte

rest

Way o

f dis

posa

l of

equit

y inte

rest

Time o

f los

s of c

ontro

l

Basis

for

deter

minin

g the

tim

e of lo

ss

of co

ntrol

Differ

ence

be

twee

n co

nside

ration

an

d sha

re of

net a

ssets

of

relev

ant

subs

idiary

as

per

cons

olida

ted

finan

cial

statem

ents

Rema

ining

sh

areho

lding

as

of th

e date

of

loss o

f con

trol

Carry

ing am

ount

of rem

aining

sh

areho

lding

as of

the d

ate of

los

s of c

ontro

l

Fair v

alue o

f rem

aining

sh

areho

lding

as

of th

e date

of

loss o

f con

trol

Gain

or los

s in

fair v

alue o

f rem

aining

share

holdi

ng

Deter

mina

tion

and k

ey

assu

mptio

n of

fair v

alue o

f rem

aining

sh

areho

lding

as

of th

e date

of

loss o

f con

trol

Relev

ant o

ther

comp

rehen

sive

incom

e of

forme

r su

bsidi

ary

trans

ferred

to

profit

or los

sQi

ngda

o Che

nming

Inter

natio

nal

Lo

gistic

s Co.,

Ltd.

23,00

0,000

.0010

0.00%

Trans

fer20

20.2.

29Wi

thout

contr

ol11

,364,8

11.86

0.00%

0.00

0.00

0.00

Shou

guan

g Che

nming

Indu

strial

Logis

tics C

o., Lt

d.7,1

00,00

0.00

100.0

0%Tra

nsfer

2020

.2.29

Witho

ut co

ntrol

5,413

,230.1

50.0

0%0.0

00.0

00.0

0

2.

Cha

nge

in c

ons

olid

atio

n sc

op

e fo

r o

ther

rea

sons

Two

new

sub

sid

iarie

s w

ere

add

ed t

o th

e sc

ope

of c

onso

lidat

ion

dur

ing

the

rep

ortin

g p

erio

d, n

amel

y C

henm

ing

(Ove

rsea

s) C

o., L

td. a

nd C

henm

ing

(Sin

gap

ore)

Co.

, Lt

d.


X Financial Report

IX. Interest in other entities

1. Interest in subsidiaries

(1) Group composition

Shareholding (%)

Name of subsidiaryPrincipal place of business

Place of incorporation

Nature of business Direct Indirect

Method of acquisition

Zhanjiang Chenming Pulp & Paper Co., Ltd. Zhanjiang, China Zhanjiang, China Paper making 100 EstablishmentShouguang Meilun Paper Co., Ltd. Shouguang, China Shouguang, China Paper making 92 EstablishmentJilin Chenming Paper Co., Ltd. Jilin, China Jilin, China Paper making 100 Merger and

acquisitionHuanggang Chenming Pulp & Paper Co., Ltd. Huanggang, China Huanggang, China Pulp production 100 EstablishmentShandong Chenming Paper Sales Co., Ltd. Shouguang, China Shouguang, China Sales of paper 100 EstablishmentShouguang Chenming Import and Export Trade Co., Ltd.

Shouguang, China Shouguang, China Import and export trade 100 Establishment

Jiangxi Chenming Supply Chain Management Co., Ltd.

Jiangxi, China Jiangxi, China Trading 70 Establishment

Chenming GmbH Hamburg, Germany Hamburg, Germany Paper product trading 100 EstablishmentShouguang Chenming Papermaking Machine Co., Ltd.

Shouguang, China Shouguang, China Machinery manufacturing

100 Establishment

Shouguang Hongxiang Printing and Packaging Co., Ltd.

Shouguang, China Shouguang, China Printing and packaging 100 Merger and acquisition

Shouguang Chenming Modern Logistic Co., Ltd. Shouguang, China Shouguang, China Transportation 100 EstablishmentJinan Chenming Investment Management Co., Ltd. Jinan, China Jinan, China Investment

management100 Establishment

Huanggang Chenming Arboriculture Development Co., Ltd.

Huanggang, China Huanggang, China Arboriculture 100 Establishment

Chenming Arboriculture Co., Ltd. Wuhan, China Wuhan, China Arboriculture 100 EstablishmentChenming Paper Korea Co., Ltd. Seoul, Korea Seoul, Korea Sales of paper 100 EstablishmentShandong Chenming Power Supply Holdings Co., Ltd. Shouguang, China Shouguang, China Power Supply 100 EstablishmentShouguang Shun Da Customs Declaration Co, Ltd. Shouguang, China Shouguang, China Customs declaration 100 EstablishmentShanghai Chenming Industrial Co., Ltd. Shanghai, China Shanghai, China Property investment

and management100 Establishment

Shandong Chenming Paper Group (Fuyu) Sales Co., Ltd. Fuyu, China Fuyu, China Sales of paper 100 EstablishmentShandong Chenming Group Finance Co., Ltd. Jinan, China Jinan, China Finance 80 20 EstablishmentJiangxi Chenming Paper Co., Ltd. Nanchang, China Nanchang, China Paper making 42.46 40.79 EstablishmentShouguang Chenming Art Paper Co., Ltd. Shouguang, China Shouguang, China Paper making 75 EstablishmentHailaer Chenming Paper Co., Ltd. Hailaer, China Hailaer, China Paper making 75 EstablishmentShandong Grand View Hotel Co., Ltd. Shouguang, China Shouguang, China Catering 70 EstablishmentWuhan Chenming Hanyang Paper Holdings Co., Ltd. Wuhan, China Wuhan, China Paper making 65.205 EstablishmentChengdu Chenming Culture Communication Co., Ltd. Chengdu, China Chengdu, China Marketing 100 EstablishmentShandong Chenming Financial Leasing Co., Ltd. Jinan, China Jinan, China Financial leasing 100 EstablishmentQingdao Chenming Nonghai Financial Leasing Co., Ltd. Qingdao, China Qingdao, China Financial leasing 100 EstablishmentChenming (HK) Limited Hong Kong, China Hong Kong, China Paper product trading 100 EstablishmentChenming (Overseas) Co., Ltd. Hong Kong, China Hong Kong, China Paper product trading 100 EstablishmentChenming (Singapore) Co., Ltd. Singapore Singapore Paper product trading 100 EstablishmentShouguang Hongyi Decorative Packaging Co., Ltd. Shouguang, China Shouguang, China Packaging 100 Merger and

acquisitionShouguang Xinyuan Coal Co., Ltd. Shouguang, China Shouguang, China Coal 100 Merger and

acquisitionShouguang City Run Sheng Wasted Paper Recycle Co., Ltd.

Shouguang, China Shouguang, China Purchase and sale of waste

100 Merger and acquisition


X Financial Report

Shareholding (%)

Name of subsidiaryPrincipal place of business

Place of incorporation

Nature of business Direct Indirect

Method of acquisition

Shouguang Wei Yuan Logistics Company Limited Shouguang, China Shouguang, China Logistics 100 Merger and acquisition

Shandong Chenming Panels Co., Ltd. Shouguang, China Shouguang, China Panels 100 Merger and acquisition

Shouguang Chenming Floor Board Co., Ltd. Shouguang, China Shouguang, China Floor board 100 Merger and acquisition

Shouguang Chenming Cement Co., Limited Shouguang, China Shouguang, China Cement 100 EstablishmentWuhan Chenming Qianneng Electric Power Co., Ltd. Wuhan, China Wuhan, China Electric power 51 EstablishmentShandong Chenming Investment Limited Jinan, China Jinan, China Investment 100 EstablishmentJapan Chenming Paper Co., Ltd. Tokyo, Japan Tokyo, Japan Paper product trading 100 EstablishmentChenming International Co., Ltd. Los Angeles, USA Los Angeles, USA Paper product trading 100 EstablishmentZhanjiang Chenming Arboriculture Development Co., Ltd. Zhanjiang, China Zhanjiang, China Arboriculture 100 EstablishmentYangjiang Chenming Arboriculture Development Co., Ltd. Yangjiang, China Yangjiang, China Arboriculture 100 EstablishmentNanchang Chenming Arboriculture Development Co., Ltd. Nanchang, China Nanchang, China Arboriculture 100 EstablishmentGuangdong Huirui Investment Co., Ltd. Zhanjiang, China Zhanjiang, China Investment 100 Merger and

acquisitionZhanjiang Chenming New-style Wall Materials Co., Ltd. Zhanjiang, China Zhanjiang, China Wall materials 100 EstablishmentJilin Chenming New-style Wall Materials Co., Ltd. Jilin, China Jilin, China Wall materials 100 EstablishmentJilin Chenming Logistics Co., Ltd. Jilin, China Jilin, China Logistics 100 EstablishmentJiangxi Chenming Logistics Co., Ltd. Nanchang, China Nanchang, China Logistics 100 EstablishmentFuyu Chenming Paper Co., Ltd. Fuyu, China Fuyu, China Paper making 100 EstablishmentZhanjiang Meilun Pulp & Paper Co., Ltd. Zhanjiang, China Zhanjiang, China Paper making 100 EstablishmentShanghai Chenming Group Financial Leasing Co., Ltd. Shanghai, China Shanghai, China Financial leasing 100 EstablishmentGuangzhou Chenming Financial Leasing Co., Ltd. Guangzhou, China Guangzhou, China Financial leasing 100 EstablishmentShanghai Hongtai Real Estate Co., Ltd. Shanghai, China Shanghai, China Real estate 100 Merger and

acquisitionShanghai Hongtai Property Management Co., Ltd. Shanghai, China Shanghai, China Property Management 100 Merger and

acquisitionShandong Chenming Commercial Factoring Co., Ltd. Jinan, China Jinan, China Business factoring 100 EstablishmentGuangzhou Chenming Commercial Factoring Co., Ltd. Guangzhou, China Guangzhou, China Business factoring 51 EstablishmentQingdao Chenming Pulp & Paper Electronic

Commodity Spot Trading Center Co., Ltd.Qingdao, China Qingdao, China Trading 30 70 Establishment

Shandong Chenming Paper Coated Paper Sales Co., Ltd.

Shouguang, China Shouguang, China Sales 100 Establishment

Zhanjiang Chenming Port Co., Ltd. Zhanjiang, China Zhanjiang, China Loading and unloading 100 EstablishmentBeijing Chenming Financial Leasing Co., Ltd. Beijing, China Beijing, China Finance 100 EstablishmentChenming Paper United States Co., Ltd. USA 3200 EL CAMINO

REAL, SUITE 130, IRVINE, CA

Paper trading 100 Establishment

Guangdong Chenming Panels Co., Ltd. Guangdong Guangdong Panels 100 EstablishmentMeilun (BVI) Limited Cayman Cayman 100 EstablishmentWeifang Chenming Growth Driver Replacement Equity Investment Fund Partnership (Limited Partnership)

Weifang Weifang Fund 79 Establishment

Nanjing Chenming Culture Communication Co., Ltd. Nanjing Nanjing Marketing 100 EstablishmentShanghai Chenming Pulp & Paper Sales Co., Ltd. Shanghai, China Shanghai, China Sales of pulp and paper 100 Establishment

IX. Interest in other entities (Cont’d)

1. Interest in subsidiaries (Cont’d)

(1) Group composition (Cont’d)


X Financial Report


1. Interest in subsidiaries (Cont’d)

(2) Major non-wholly owned subsidiaries

Unit: RMB

Name of subsidiaryMinority interest

Gain or loss attributable to

minority interest during the period

Dividend to minority interest declared during

the period

Closing balance of

minority interest

Wuhan Chenming Hanyang Paper Holdings Co., Ltd. 34.80% 130,961,346.12 242,658,667.31Shouguang Chenming Art Paper Co., Ltd. 25.00% 692,249.39 99,058,489.45Jiangxi Chenming Paper Co., Ltd. 16.75% 16,377,116.11 8,375,000.00 552,551,611.24Shouguang Meilun Paper Co., Ltd. 8.00% 4,398,120.59 438,545,346.36


X Financial ReportIX

. In

tere

st in

oth

er e

ntiti

es (C

ont’ d

)

1.

Inte

rest

in s

ubsi

dia

ries

(Con

t’ d)

(3)

Key

fin

anci

al in

form

atio

n o

f m

ajo

r no

n-w

holly

ow

ned

sub

sid

iari

es

Uni

t: R

MB

Closin

g bala

nce

Open

ing ba

lance

Name

of su

bsidi

aryCu

rrent

asse

tsNo

n-curr

ent a

ssets

Total

asse

tsCu

rrent

liabil

ities

Non-c

urren

t

liabil

ities

Total

liabil

ities

Curre

nt as

sets

Non-c

urren

t ass

etsTo

tal as

sets

Curre

nt lia

bilitie

s

Non-c

urren

t

liabil

ities

Total

liabil

ities

Wuha

n Che

nming

Ha

nyan

g Pap

er

Ho

lding

s Co.,

Ltd.

796,3

65,36

9.50

1,017

,024,2

89.91

1,813

,389,6

59.41

1,056

,108,8

56.15

38,77

4,975

.641,0

94,88

3,831

.7924

2,300

,843.2

81,0

42,53

0,549

.731,2

84,83

1,393

.0185

4,628

,918.2

284

,521,0

86.72

939,1

50,00

4.94

Shou

guan

g Che

nming

Ar

t Pap

er Co

., Ltd.

538,7

20,02

1.42

552,0

91,92

1.51

1,090

,811,9

42.93

694,5

77,98

5.19

694,5

77,98

5.19

651,0

04,03

3.69

573,2

04,37

8.67

1,224

,208,4

12.36

830,7

43,45

2.16

830,7

43,45

2.16

Jiang

xi Ch

enmi

ng

Pa

per C

o., Lt

d.4,4

31,05

0,327

.603,7

49,40

6,518

.068,1

80,45

6,845

.663,8

80,51

8,059

.331,0

68,75

8,391

.604,9

49,27

6,450

.935,1

76,44

6,285

.483,8

45,10

0,253

.809,0

21,54

6,539

.284,6

43,40

3,573

.271,1

94,73

6,398

.815,8

38,13

9,972

.08

Shou

guan

g Meil

un

Pa

per C

o., Lt

d.5,1

88,03

1,185

.5911

,199,9

41,76

3.83

16,38

7,972

,949.4

210

,039,2

37,02

4.74

871,7

04,60

4.79

10,91

0,941

,629.5

35,0

71,13

7,194

.6511

,453,6

63,65

2.73

16,52

4,800

,847.3

810

,013,2

97,48

8.59

1,186

,061,8

31.08

11,19

9,359

,319.6

7


X Financial Report


2. Interest in joint arrangements or associates

(1) Major joint ventures and associates

Shareholding

Name of joint ventures and associatesPrinciple place

of businessPlace of

incorporationNature of business Direct Indirect

Accounting method

Weifang Sime Darby West Port Co., Ltd. Weifang, China Weifang, China Port construction 50.00 Equity methodNingbo Qichen Huamei Equity Investment Fund Partnership (Limited Partnership)

Ningbo, China Ningbo, China Investment management

40.00 Equity method

Weifang Xingxing United Chemical Co., Ltd.

Weifang, China Weifang, China Chemical engineering 50.00 Equity method

Zhuhai Dechen New Third Board Equity Investment Fund Company (Limited Partnership)

Zhuhai, China Zhuhai, China Investment management

50.00 Equity method

Goldtrust Futures Co., Ltd. Changsha Changsha Futures 35.43 Equity methodWeifang Chenming Growth Driver Replacement Equity Investment Fund Partnership (Limited Partnership)

Weifang Weifang Investment management

44.44 Equity method

Guangdong Nanyue Bank Co., Ltd. Guangdong Guangdong Bank 16.62 Equity method


X Financial Report


2. Interest in joint arrangements or associates (Cont’d)

(2) Key financial information of major joint ventures

Unit: RMB

Closing balance/amount for the period

Opening balance/amount for the prior period

Item

Weifang Sime Darby West

Port Co., Ltd.

Weifang Xingxing United Chemical

Co., Ltd.

Weifang Sime Darby West

Port Co., Ltd.

Weifang Xingxing United Chemical

Co., Ltd.

Current assets 21,064,715.93 128,074,700.60 26,890,506.23 94,334,994.14Of which: Cash and cash equivalents 4,931,553.08 74,028,507.40 8,299,040.10 25,959,739.14Non-current assets 534,323,243.57 33,973,666.50 543,566,206.60 32,100,379.42Total assets 555,387,959.50 162,048,367.10 570,456,712.83 126,435,373.56Current liabilities 14,260,458.22 27,221,822.09 16,216,196.08 27,927,549.31Non-current liabilities 382,165,018.01 40,000,000.00 389,517,611.14Total liabilities 396,425,476.23 67,221,822.09 405,733,807.22 27,927,549.31Equity interest attributable to shareholders of the parent company 158,962,483.27 94,826,545.01 164,722,905.61 98,507,824.25Share of net assets based on shareholding 79,481,241.64 47,413,272.51 82,361,452.81 49,253,912.13– Unrealised profit arising from intra-group transactions 7,365,218.95 44,943,495.09 7,365,218.95 44,562,645.26Carrying amount of investment in joint ventures 86,846,460.59 92,356,767.60 89,726,671.76 93,816,557.39Revenue 31,672,998.02 25,838.06 7,744,022.16 78,509,386.24Finance expenses 10,889,263.03 -289,698.53 10,159,513.72 -261,143.08Income tax expenses 2,733,067.31Net profit -5,760,422.34 -2,919,579.59 -15,939,693.96 8,199,201.95Total comprehensive income -5,760,422.34 -2,919,579.59 -15,939,693.96 8,199,201.95


X Financial Report


2. Interest in joint arrangements or associates (Cont’d)

(3) Key financial information of major associates

Unit: RMB

Closing balance/amount for the reporting period

Opening balance/amount for the prior period

Item

Ningbo Qichen Huamei Equity

Investment FundPartnership

(Limited Partnership)

Zhuhai Dechen New Third Board

Equity Investment Fund Company


Ningbo Qichen Huamei Equity

Investment Fund Partnership


Zhuhai Dechen New Third Board

Equity Investment Fund Company


Current assets 27,675,379.91 5,750,038.07 43,709,912.78 5,810,979.79Non-current assets 171,877,206.00 99,020,000.00 154,450,006.00 99,020,000.00Total assets 199,552,585.91 104,770,038.07 198,159,918.78 104,830,979.79Current liabilities 28,721.17 5,000.00 21,826.94 5,000.00Total liabilities 28,721.17 5,000.00 21,826.94 5,000.00Equity interest attributable to shareholders of the parent

company 199,523,864.74 104,765,038.07 198,138,091.84 104,825,979.79Share of net assets based on shareholding 79,809,545.90 52,382,519.04 79,255,236.74 52,412,989.90Carrying amount of investment in associates 200,045,046.02 52,382,519.05 199,528,847.52 52,412,989.91Net profit 1,290,560.77 -60,941.72 1,998,750.11 217,016.34Total comprehensive income 1,290,560.77 -60,941.72 1,998,750.11 217,016.34

(4) Excess loss of joint ventures or associates

Unit: RMB

Name of joint ventures or associates

Accumulated unrecognised loss incurred

for prior periods

Unrecognised loss (or share of

net profit) for the period

Unrecognised loss (or share of

net profit) for the period

Arjo Wiggins Chenming Specialty Paper Co., Ltd. 7,308,869.16 7,308,869.16Xuchang Chenming Paper Co., Ltd. 4,091,767.83 9,967,855.32 14,059,623.15


X Financial Report

X. Risk relating to financial instruments

Main financial instruments of the Group include monetary funds, bills receivable, accounts receivable, other receivables, non-current assets due within one year, other current assets, other non-current financial assets, long-term receivables, bills payable, accounts payable, other payables, short-term borrowings, non-current liabilities due within one year, long-term borrowings, bonds payable and long-term payables. Details of financial instruments refer to related notes. The risks associated with these financial instruments and the risk management policies adopted by the Company to mitigate these risks are described below. The management of the Company manages and monitors these exposures to ensure that the above risks are controlled in a limited extent.

1. Risk management goals and policies

The Group aims to seek the appropriate balance between the risks and benefits in order to mitigate the adverse effects on the Group’s financial performance from financial risk. Based on such objectives, the Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and devise corresponding internal control procedures, and to monitor risks faced by the Group. Such risk management policies and internal control systems are reviewed regularly to adapt to changes in market conditions and the Group’s activities. The internal audit department of the Group undertakes both regular and ad-hoc reviews of risk management controls and procedures.

Risks associated with the financial instrument of the Group mainly include credit risk, liquidity risk, market risk (including exchange rate risk, interest rate risk and commodity price risk).

The board of directors is responsible to plan and establish the Group’s risk management structure, make risk management policies and related guidelines, and supervise the implementation of risk management. The Group has already made risk management risks to identify and analyse risks that the Group face. These policies mentioned specific risks, covering market, credit risk and liquidity risk etc. The Group regularly assesses market environment and the operation of the Group changes to determine if to make alteration to risk management policy and systems. The Group’s risk management is implemented by Risk Management Committee according to the approval of the board of directors. The Risk Management Committee works closely with other business department of the Group to identify, evaluating and avoiding certain risks. The Group’s internal audit department will audit the risk management control and procedures regularly and report the result to audit committee of the Group.

The Group spreads risks through diverse investment and business lines, and through making risk management policy to reduce risks of single industry, specific area and counterpart.

(1) Credit risks

Credit risk refers to risk associated with the default of contract obligation of a transaction counterparty.

The Group manages credit risk based category. Credit risks mainly arose from bank deposit, bills receivable, accounts receivable, other receivables and long-term receivables etc.

The Group’s bank deposit mainly deposits in state-owned banks and other large and medium-sized listed banks. The Group anticipated that the bank deposit does not have significant credit risk.

For bill receivable, accounts receivables, other receivables and long-term receivables, the Group set related policies to control exposure of credit risks. The Group evaluate client’s credit quality and set related credit period based on the client’s financial status, credit records and other factors such as current market situation etc. The Group keep monitor the client’s credit record and for client with deteriorate credit records, the Group will ensure the credit risk is under control in whole by means of written notice of payment collection, shorten or cancel credit period.

The Group’s debtor spread over different industry and area. The Group continued to assess the credit evaluation to receivables and purchase credit guarantee insurance if necessary.

The biggest credit risk exposure of the Group is the carrying amount of each financial asset in the balance sheet. The Group did not provide financial guarantee which resulted in credit risks.

The amount of top 5 accounts receivable of the Group accounted for 31.17% (2019: 29.05%) of the Group’s total accounts receivables. The amount of top 5 other receivable of the Group accounted for 60.04% (2019: 87.09%) of the Group’s total other receivables.


X Financial Report

X. Risk relating to financial instruments (Cont’d)

1. Risk management goals and policies (Cont’d)

(2) Liquidity risk

Liquidity risk refers to the risks that the Group will not be able to meet its obligations associated with its financial liabilities that are settled by delivering cash or other financial assets.

To manage the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. The management of the Group monitors the usage of bank borrowings and ensures compliance with the borrowing agreements. In the meantime, we obtain commitments from major financial institutions to provide sufficient standby funds to meet short-term and long-term funding needs.

Operating cash was generated from capital and bank and other borrowings. As of 30 June 2020, the Group’s unused bank loan credit is RMB35,354.9489 million (31 December 2019: 34,072.1416 million).

As at the end of the period, the financial assets and financial liabilities of the Group are analysed by their maturity date as below at their undiscounted contractual cash flows (in ten thousand RMB):

30 June 2020Item Within 1 year 1-2 years 2-3 years 3-4 years Over 4 years Total

Financial assets:Monetary funds 1,930,176.12 1,930,176.12Accounts receivable 289,776.58 289,776.58Accounts receivable financing 141,870.27 141,870.27Other receivables 352,427.31 352,427.31Long-term receivables 61,373.61 6,484.02 8,785.38 76,643.01Other current assets 855,840.76 855,840.76Non-current assets due within one year 601,058.02 601,058.02

Total financial assets 4,171,149.06 61,373.61 6,484.02 8,785.38 - 4,247,792.07

Financial liabilities:Short-term borrowings 3,855,431.12 3,855,431.12Bills payable 274,760.68 274,760.68Accounts payable 424,490.64 424,490.64Other payables 169,437.01 169,437.01Non-current liabilities due within one year 693,685.95 693,685.95Other current liabilities 15,068.62 15,068.62Long-term borrowings 273,762.32 116,584.06 32,147.50 278,442.29 700,936.17Bonds payable 127,813.42 35,000.00 162,813.42Lease liabilities 457.07 443.29 472.83 7,277.58 8,650.78Long-term payables 117,454.39 73,980.58 26,179.44 57,263.68 274,878.09

Total financial liabilities and contingent liabilities 5,432,874.02 519,487.20 226,007.93 58,799.77 342,983.55 6,580,152.47


X Financial Report



(2) Liquidity risk (Cont’d)

As at the beginning of the period, the financial assets and financial liabilities of the Group at the reporting date are analysed by their maturity date as below at their undiscounted contractual cash flows (in ten thousand RMB):

31 December 2019Item Within 1 year 1-2 years 2-3 years 3-4 years Over 4 years Total

Financial assets:Monetary funds 1,906,656.98 1,906,656.98Accounts receivable 307,736.22 307,736.22Accounts receivable financing 44,291.59 44,291.59Other receivables 270,183.01 270,183.01Long-term receivables 17,413.54 23,488.20 81,470.83 122,372.57Other current assets 808,452.56 808,452.56Non-current assets due within one year 697,303.80 697,303.80

Total financial assets 4,034,624.16 17,413.54 23,488.20 81,470.83 4,156,996.73

Financial liabilities:Short-term borrowings 3,688,315.60 3,688,315.60Bills payable 151,504.82 151,504.82Accounts payable 435,108.76 435,108.76Other payables 238,605.99 238,605.99Non-current liabilities due within one year 566,295.89 566,295.89Other current liabilities 22,240.25 22,240.25Long-term borrowings 521,440.85 117,319.88 86,672.98 188,600.26 914,033.97Bonds payable 116,920.09 8,907.00 125,827.09Lease liabilities 457.07 443.29 472.83 7,220.12 8,593.31Long-term payables 64,272.98 96,887.59 83,321.65 87,671.33 332,153.55

Total financial liabilities and contingent liabilities 5,102,071.31 703,090.99 223,557.76 170,467.46 283,491.71 6,482,679.23

The financial liabilities disclosed above are based on cash flows that are not discounted and may differ from the carrying amount of the line items of the balance sheet. Financial guarantees issued do not represent the amount to be paid.


X Financial Report



(3) Market risk

Market risk includes interest rate risk and currency risk, refers to the risk that the fair value or future cash flow of a financial instrument will be fluctuated due to the changes in market price.

Interest risk

Interest rate risk refers to the risk that the fair value or future cash flow of a financial instrument will be fluctuated due to the floating rate. Interest rate risk arises from recognised interest-bearing financial instrument and unrecognised financial instrument (e.g. loan commitments).

The Group’s interest rate risk arises from long-term interest-bearing liabilities including long-term borrowing and bonds payable. Financial liabilities issued at floating rate expose the Group to cash flow interest rate risk. Financial liabilities issued at fixed rate expose the Group to fair value interest rate risk. The Group determines the relative proportions of its fixed rate and floating rate contracts depending on the prevailing market conditions and to maintain an appropriate combination of financial instruments at fixed rate and floating rate through regular reviews and monitors.

The Group’s finance department continuously monitors the interest rate position of the Group. The Group did not enter into any interest rate hedging arrangements. But the management is responsible to monitor the risks of interest rate and consider to hedge significant interest risk if necessary. Increase in interest rates will increase the cost of new borrowing and the interest expenses with respect to the Group’s outstanding floating rate interest-bearing borrowings, and therefore could have a material adverse effect on the Group’s financial result. The management will make adjustments with reference to the latest market conditions. These adjustments may include enter into interest swap agreement to mitigate its exposure to the interest rate risk.

Interest bearing financial instrument held by the Group are as follows (in ten thousand RMB):

ItemBalance for

the periodBalance for

the prior year

Financial instrument with fixed interest rateFinancial liabilitiesOf which: Short-term borrowings 3,855,431.12 3,688,315.60Long-term borrowings 1,163,772.48 914,033.97Bonds payable 162,813.42 125,827.09

Total 5,182,017.03 4,728,176.66

Financial instrument with float interest rateFinancial assetsOf which: Monetary funds 221,115.73 288,790.99

Total 221,115.73 288,790.99

The financial instruments held by the Group at the reporting date expose the Group to fair value interest rate risk. This sensitivity analysis as above has been determined assuming that the change in interest rates had occurred at the reporting date and arisen from the recalculation of the above financial instrument issued at new interest rates. The non-derivative tools issued at floating interest rate held by the Group at the reporting date expose the Group to cash flow interest rate risk. The effect to the net profit and shareholder’s equity illustrated in the sensitivity analysis as above is arisen from the effect to the annual estimate amount of interest expenses or revenue at the floating interest rate. The analysis is performed on the same basis for prior year.


X Financial Report



(3) Market risk (Cont’d)

Exchange rate risk

Exchange risk refers to the risk that the fair value or future cash flows of a financial instrument will be fluctuated due to the changes in foreign currency rates. Foreign currency risk arises on financial instruments that are denominated in a currency other than the functional currency in which they are measured.

The principal business of the Group is situated within the PRC and is denominated in RMB. However, foreign exchange risks still exist for the assets and liabilities in foreign currencies and future foreign currency transactions as recognised by the Group (assets and liabilities in foreign currencies and foreign currency transactions are mainly denominated in US dollar, Japanese yen, South Korean Won and Euro).

The following table details the financial assets and liabilities held by the Group which denominated in foreign currencies and amounted to RMB as at 30 June 2020 are as follows (in RMB ten thousands):

Liabilities denominated in foreign currency

Asset denominated in foreign currency

ItemAs at the end of the period

As at the beginning of

the periodAs at the end of the period

As at the beginning of

the period

USD 569,541.73 453,753.14 95,384.06 147,730.57EUR 9,260.62 9,890.43 7,536.40 5,131.53HKD 2,153.25 3,150.80 3,335.82 63.69KRWYEN 941.18GBP 5.22 1.86

Total 580,955.59 466,794.37 106,261.50 153,868.82

The Company closely monitors the impact of exchange rate changes on the Company’s foreign exchange risk. The Company has not taken any measures to avoid foreign exchange risks. However, the management is responsible for monitoring exchange rate risks and will consider hedging significant exchange rate risks when necessary.

With other variables unchanged, the after-tax effect of the possible reasonable changes in the exchange rate of foreign currency to RMB on the current profit and loss of the Group is as follows (in RMB ten thousands):

Increase (decrease) in after-tax profits Balance for the period Balance for the prior year

Increase in exchange rate of USD 5% -17,317.30 5% -15,301.13Decrease in exchange rate of USD -5% 17,317.30 -5% 15,301.13Increase in exchange rate of Euro 5% -107.48 5% -237.95Decrease in exchange rate of Euro -5% 107.48 -5% 237.95


X Financial Report


2. Capital management

The objective of the Group’s capital risk management is to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the number of dividends paid to shareholders, return capital to shareholders, issue new shares or disposes assets to reduce its liabilities.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net liabilities divided by total capital. As at 30 June 2020, the Group’s gearing ratio is 73.49% (31 December 2019: 73.11%).

XI. Fair value

1. Fair value of assets and liabilities measured at fair value as at the end of the period

Unit: RMB

Fair value as at the end of the periodItem Level 1 Level 2 Level 3 Total

I. Continuous measurement of fair value – – – –(I) Other non-current financial assets 147,445,653.55 147,445,653.55(II) Biological assets

1. Consumable biological assets 1,556,753,786.65 1,556,753,786.65

2. Level 3 continuous measurement, adjustment between opening and closing value and sensitivity of unobservable inputs

The Company adopts sensitivity analysis techniques to analyse the possible effects of reasonable and probable changes in risk variables to profit or loss for the period or to the shareholders’ equity. Since risk variables seldom change on a stand-alone basis, while the correlation between variables may have significant effect on the ultimate amount of change effected by the change in a single risk variable, the analysis below is based on the assumption that the changes in each variable occurred separately.

For the year For the prior year

Item

Change in investment yield or discount rate

Impact on profit

Impact on shareholders’

equityImpact

on profit

Impact on shareholders’

equity

Consumable biological assets Increases by 1% -32,178,275.96 -32,178,275.96 -33,202,809.15 -33,202,809.15Consumable biological assets Decreases by 1% 36,713,253.94 36,713,253.94 36,397,424.88 36,397,424.88

Note: In the prior period, the income method was used to evaluate the impact of the change in the discount rate on the fair value. In the current period, the harvest present value method is used to assess the impact of the change in investment yield on fair value.

3. Fair value of financial assets and financial liabilities not measured at fair value

The Company’s financial assets and financial liabilities not measured at fair value mainly consist of: accounts receivable, short-term borrowings, accounts payable, long-term borrowings, bonds payable and long-term payables. The carrying amount of the above financial assets and financial liabilities deviates from the fair value by a small amount.


X Financial Report

XII. Related parties and related party transactions

1. Parent company of the Company

Name of parent companyPlace of

incorporation Nature of business

Registered capital

(RMB’ 0,000)

Shareholding of the parent

company in the Company

Voting right of the parent company in

the Company

Chenming Holdings Company Limited Shouguang

Investment in manufacture of paper, electricity, steam, arboriculture 123,878.77 27.87% 27.87%

Note: The ultimate controller of the Company is State-owned Assets Supervision and Administration Bureau of Shouguang City.

2. Subsidiaries of the Company

Please refer to Note IX. 1. Interest in subsidiaries for details.

3. Joint ventures and associates of the Company

Please refer to Note IX. 2. Interest in joint ventures or associates for details.

Balance of related party transaction between the Company and its joint ventures or associates during the period or prior periods are as follows:

Name of joint ventures or associates Relation

Shouguang Chenming Huisen New-style Construction Materials Co., Ltd. A joint venture of the Company

Xuchang Chenming Paper Co., Ltd. An associate of the CompanyWeifang Sime Darby West Port Co., Ltd. A joint venture of the CompanyJiangxi Jiangbao Media Colour Printing Co., Ltd. An associate of the CompanyChenming (Qingdao) Asset Management Co., Ltd. An associate of the CompanyJiangxi Chenming Port Co., Ltd. An associate of the CompanyWeifang Xingxing United Chemical Co., Ltd. A joint venture of the CompanyGuangdong Nanyue Bank Co., Ltd. An associate of the Company


X Financial Report

XII. Related parties and related party transactions (Cont’d)

4. Other related parties

Name of other related parties Relation

Shandong Shouguang Jinxin Investment Development Holdings Group Co., Ltd.

Shareholder of the Company’s largest shareholder

Shouguang Henglian Enterprise Investment Limited Shareholder of the Company’s largest shareholderShouguang Ruifeng Enterprise Investment Limited Shareholder of the Company’s largest shareholderChenming Holdings (Hong Kong) Limited Subsidiary of the Company’s largest shareholderZhanjiang Chenming Real Estate Co., Ltd. Subsidiary of the Company’s largest shareholderQingdao Hongji Weiye Investment Co., Ltd. Subsidiary of the Company’s largest shareholderShouguang Hengying Real Estate Co., Ltd. Subsidiary of the Company’s largest shareholderShouguang Hengtai Enterprise Investment Co., Ltd. A company invested by the Directors and senior

management of the CompanyShouguang Huixin Construction Materials Co., Ltd. A company invested by the Directors and senior

management of the CompanyShouguang Chenming Guangyuan Real Property Co., Ltd.

and its subsidiariesA company invested by the Directors and senior management of the Company

Qingdao Chenming Nonghai Investment Co., Ltd. and its subsidiaries

A company invested by the Directors and senior management of the Company

Nanchang Chenjian New-style Wall Materials Co., Ltd. A company invested by the Directors and senior management of the Company

Shouguang Hengde Enterprises Investment Co., Ltd. A company invested by the Directors and senior management of the Company

Zhejiang Huaming Investment Management Co., Ltd. and its subsidiaries

Directors and senior management served by the Company’s Directors

Hebei Chenming Zhongjin Real Estate Development Co., Ltd. and its subsidiaries

Directors and senior management served by the Company’s Supervisors

Wuhan Chenming Zhongjin Real Estate Co., Ltd. and its subsidiaries


Wuhan Rongsheng Zhongjin Development and Investment Co., Ltd. and its subsidiaries


Shouguang Hengyuan Energy Co., Ltd. Directors and senior management served by the Company’s Supervisors

Qingzhou Chenming Denaturation Amylum Co., Ltd. Investee of the CompanyAnhui Time Source Corporation Investee of the CompanyShandong Hongqiao Venture Capital Co., Ltd. Investee of the CompanyShanghai Hengzheng Venture Investment Center

(Limited Partnership)Investee of the Company

Lide Technology Co., Ltd. Investee of the CompanyJiangxi Jiuyu Energy Co., Ltd. and its subsidiaries Directors and senior management served by the

Company’s Directors in the past twelve monthChen Hongguo, Hu Changqing, Li Xingchun, Geng Guanglin,

Li Feng, Chen Gang, Dong Lianming and Yuan XikunKey management personnel


X Financial Report


5. Related party transactions

(1) Purchase and sales of goods and rendering and receiving services

Table on purchase of goods/receiving of services

Unit: RMB

Related partyDetails of related party transaction

Amount for the period

Transaction facility

approved

Whether the transaction

facility is exceeded

Amount for the prior

period

Jiangxi Jiuyu Energy Co., Ltd. Procurement of natural gas and heavy oil, etc.

68,606,145.25 600,000,000.00 No 112,367,700.00

Weifang Xingxing United Chemical Co., Ltd.

Procurement of hydrogen peroxide etc.

0 45,877,683.03

Table on sales of goods/providing of services

Unit: RMB

Related partyDetails of related party transaction

Amount for the period


Shouguang Chenming Huisen New-style Construction Materials Co., Ltd. Sales of electricity, gas, etc. 3,186,741.72 3,980,581.15Shouguang Huixin Construction Materials Co., Ltd. Machinery materials, etc. 2,422,678.94 34,785.90


X Financial Report


5. Related party transactions (Cont’d)

(2) Guarantee

The Company as guarantor

Unit: RMB

Guarantor Party being guaranteed

Amount under

guaranteeStarting date of guarantee

Expiry date of guarantee

Whether performance of guarantee is completed

Shandong Chenming Paper Holdings Limited Weifang Sime Darby West Port Co., Ltd. 135,000,000.00 2017/12/20 2027/12/20 NoShandong Chenming Paper Holdings Limited Shouguang Meilun Paper Co., Ltd. 125,705,687.82 2019/8/6 2020/8/6 NoShandong Chenming Paper Holdings Limited Shouguang Meilun Paper Co., Ltd. 100,000,000.00 2019/9/30 2020/9/30 NoShandong Chenming Paper Holdings Limited Shouguang Meilun Paper Co., Ltd. 168,622,526.92 2019/12/9 2020/12/3 NoShandong Chenming Paper Holdings Limited Shouguang Meilun Paper Co., Ltd. 24,851,540.87 2020/3/25 2020/9/25 NoShandong Chenming Paper Holdings Limited Shouguang Meilun Paper Co., Ltd. 99,476,860.75 2020/4/8 2020/10/8 NoShandong Chenming Paper Holdings Limited Shouguang Meilun Paper Co., Ltd. 132,570,677.48 2020/6/8 2020/12/8 NoShandong Chenming Paper Holdings Limited Shandong Chenming Paper Sales Co., Ltd. 280,000,000.00 2019/7/30 2020/7/29 NoShandong Chenming Paper Holdings Limited Shandong Chenming Paper Sales Co., Ltd. 253,272,043.36 2020/3/9 2021/3/4 NoShandong Chenming Paper Holdings Limited Shandong Chenming Paper Sales Co., Ltd. 60,000,000.00 2020/3/31 2021/1/22 NoShandong Chenming Paper Holdings Limited Shandong Chenming Paper Sales Co., Ltd. 240,000,000.00 2020/3/31 2020/9/7 NoShandong Chenming Paper Holdings Limited Shandong Chenming Paper Sales Co., Ltd. 420,456,575.63 2020/5/6 2021/5/2 NoShandong Chenming Paper Holdings Limited Shandong Chenming Paper Sales Co., Ltd. 100,000,000.00 2020/6/10 2021/6/7 NoShandong Chenming Paper Holdings Limited Shandong Chenming Paper Sales Co., Ltd. 270,000,000.00 2020/6/16 2021/1/22 NoShandong Chenming Paper Holdings Limited Shanghai Chenming Pulp & Paper Sales

Co., Ltd20,000,000.00 2019/8/30 2020/8/7 No

Shandong Chenming Paper Holdings Limited Shanghai Chenming Pulp & Paper Sales Co., Ltd

10,000,000.00 2019/12/27 2020/12/24 No

Shandong Chenming Paper Holdings Limited Shanghai Chenming Pulp & Paper Sales Co., Ltd

5,000,000.00 2020/5/11 2021/5/10 No

Shandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 2019/8/16 2020/8/14 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 86,000,000.00 2019/8/21 2020/8/20 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,108,549.49 2019/9/6 2020/9/6 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 200,000,000.00 2019/10/9 2020/10/8 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 80,000,000.00 2019/10/14 2020/10/13 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 110,000,000.00 2019/10/16 2020/10/15 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 115,000,000.00 2019/11/5 2020/11/4 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 90,000,000.00 2019/11/8 2020/11/7 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 166,668,000.00 2019/11/13 2020/11/13 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 90,000,000.00 2019/11/5 2020/11/14 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2019/12/9 2020/12/8 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2019/12/17 2020/12/16 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 49,556,500.00 2019/11/13 2020/11/5 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 89,000,000.00 2020/3/18 2020/9/14 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 99,600,000.00 2020/3/26 2020/9/22 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2020/1/14 2021/1/13 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 125,000,000.00 2020/1/21 2021/1/21 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2020/2/11 2021/2/10 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2020/2/19 2021/2/18 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2020/2/27 2021/2/25 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 2020/2/18 2021/2/12 No


X Financial Report


Amount under




Shandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 300,000,000.00 2020/2/29 2021/2/28 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 30,000,000.00 2020/3/13 2021/3/10 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 70,000,000.00 2020/3/13 2021/3/12 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2020/3/25 2021/3/25 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 50,000,000.00 2020/3/27 2021/3/22 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 38,229,300.00 2020/3/25 2021/3/24 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 53,096,250.00 2020/1/13 2020/7/10 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 353,975,000.00 2020/2/26 2021/2/25 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 30,071,580.00 2020/4/29 2020/10/26 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 90,000,000.00 2020/5/18 2020/11/17 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 31,857,750.00 2020/5/21 2021/5/18 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 33,981,600.00 2020/5/27 2020/11/26 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 51,500,000.00 2020/6/1 2020/11/24 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 90,000,000.00 2020/6/3 2020/12/1 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 90,000,000.00 2020/6/8 2020/12/5 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2020/5/19 2020/8/19 NoShandong Chenming Paper Holdings Limited Jilin Chenming Paper Co., Ltd. 20,000,000.00 2020/3/16 2021/2/26 NoShandong Chenming Paper Holdings Limited Jilin Chenming Paper Co., Ltd. 20,053,500.00 2020/3/6 2020/9/2 NoShandong Chenming Paper Holdings Limited Jilin Chenming Paper Co., Ltd. 78,000,000.00 2020/5/18 2020/11/16 NoShandong Chenming Paper Holdings Limited Jiangxi Chenming Paper Co., Ltd. 150,000,000.00 2019/12/4 2020/12/4 NoShandong Chenming Paper Holdings Limited Jiangxi Chenming Paper Co., Ltd. 46,800,000.00 2020/2/14 2021/2/13 NoShandong Chenming Paper Holdings Limited Jiangxi Chenming Paper Co., Ltd. 25,000,000.00 2020/2/25 2020/8/21 NoShandong Chenming Paper Holdings Limited Jiangxi Chenming Paper Co., Ltd. 60,000,000.00 2020/2/24 2021/2/23 NoShandong Chenming Paper Holdings Limited Jiangxi Chenming Paper Co., Ltd. 99,000,000.00 2020/3/3 2021/3/2 NoShandong Chenming Paper Holdings Limited Jiangxi Chenming Paper Co., Ltd. 150,000,000.00 2020/3/20 2021/3/19 NoShandong Chenming Paper Holdings Limited Jiangxi Chenming Paper Co., Ltd. 90,000,000.00 2020/3/27 2021/3/26 NoShandong Chenming Paper Holdings Limited Jiangxi Chenming Paper Co., Ltd. 49,500,000.00 2020/3/19 2021/3/19 NoShandong Chenming Paper Holdings Limited Jiangxi Chenming Paper Co., Ltd. 100,000,000.00 2020/4/10 2021/4/9 NoShandong Chenming Paper Holdings Limited Jiangxi Chenming Paper Co., Ltd. 70,000,000.00 2020/4/15 2021/4/14 NoShandong Chenming Paper Holdings Limited Jiangxi Chenming Paper Co., Ltd. 73,000,000.00 2020/5/27 2021/5/26 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 200,000,000.00 2019/9/29 2020/9/28 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2019/12/23 2020/12/22 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 20,000,000.00 2020/3/30 2021/3/29 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 70,000,000.00 2020/4/27 2021/3/29 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 90,000,000.00 2020/6/24 2021/3/29 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2020/5/18 2020/12/22 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 20,000,000.00 2020/3/23 2021/3/22 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 96,942,436.11 2020/4/14 2021/4/13 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 30,000,000.00 2020/6/9 2021/6/8 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 38,057,563.89 2020/6/19 2021/6/18 No



(2) Guarantee (Cont’d)


X Financial Report


Amount under




Jiangxi Chenming Paper Co., Ltd. Chenming (HK) Limited 154,687,075.00 2019/1/12 2020/1/10 NoJiangxi Chenming Paper Co., Ltd. Chenming (HK) Limited 94,538,935.05 2020/3/19 2021/3/9 NoShandong Chenming Paper Holdings Limited Chenming (HK) Limited 70,795,000.00 2019/8/5 2021/5/30 NoShandong Chenming Paper Holdings Limited Jiangxi Chenming Paper Co., Ltd. 200,000,000.00 2019/6/28 2022/6/27 NoShandong Chenming Paper Holdings Limited Jiangxi Chenming Paper Co., Ltd. 300,000,000.00 2019/7/1 2020/6/27 NoShandong Chenming Paper Holdings Limited Jiangxi Chenming Paper Co., Ltd. 85,000,000.00 2019/10/23 2022/6/27 NoShandong Chenming Paper Holdings Limited Jiangxi Chenming Paper Co., Ltd. 114,750,000.00 2019/11/22 2022/6/27 NoZhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 106,192,500.00 2019/3/28 2022/1/7 NoZhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 208,385,082.50 2019/4/2 2022/1/6 NoShandong Chenming Paper Holdings Limited Chenming (HK) Limited 142,297,950.00 2019/4/30 2022/4/22 NoShandong Chenming Paper Holdings Limited Chenming (HK) Limited 138,191,840.00 2018/4/23 2021/4/7 NoShandong Chenming Paper Holdings Limited Chenming (HK) Limited 79,290,400.00 2018/5/4 2021/4/6 NoShandong Chenming Paper Holdings Limited Chenming (HK) Limited 49,839,680.00 2018/5/17 2021/5/5 NoZhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 262,533,732.74 2018/8/8 2021/5/25 NoZhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 262,533,732.74 2018/8/8 2021/5/25 NoZhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 267,782,087.50 2018/9/4 2021/6/21 NoZhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 267,782,087.50 2018/9/6 2021/6/21 NoZhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 168,138,125.00 2019/1/25 2021/5/21 NoZhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 106,192,500.00 2019/3/28 2021/6/16 NoZhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 208,385,082.50 2019/4/2 2021/6/10 NoZhanjiang Chenming Pulp & Paper Co., Ltd. Chenming (HK) Limited 138,050,250.00 2019/7/19 2021/6/19 NoShandong Chenming Paper Holdings Limited Chenming (HK) Limited 198,933,950.00 2018/11/30 2020/10/30 NoShandong Chenming Paper Holdings Limited Shandong Chenming Financial Leasing

Co., Ltd.25,000,000.00 2017/9/21 2020/9/21 No

Shandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 330,000,000.00 2018/10/31 2020/10/30 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 70,000,000.00 2018/10/31 2020/10/30 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 100,000,000.00 2018/12/18 2020/10/31 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 200,000,000.00 2019/7/12 2021/7/12 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 140,000,000.00 2019/12/4 2021/12/3 NoShandong Chenming Paper Holdings Limited Zhanjiang Chenming Pulp & Paper Co., Ltd. 700,870,500.00 2019/12/27 2022/12/27 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 38,240,000.00 2017/1/5 2020/9/26 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 38,240,000.00 2017/1/5 2020/12/26 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 43,690,000.00 2017/1/5 2021/3/26 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 43,690,000.00 2017/1/5 2021/6/26 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 3,900,000.00 2017/1/5 2021/9/26 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 36,260,000.00 2017/2/3 2021/9/26 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 40,160,000.00 2017/2/3 2021/12/26 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 40,160,000.00 2017/2/3 2022/3/26 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 33,420,000.00 2017/2/3 2022/6/26 NoShandong Chenming Paper Holdings Limited Huanggang Chenming Pulp & Paper Co., Ltd. 45,017,527.85 2018/11/14 2020/9/26 No

Total 13,357,901,980.70



(2) Guarantee (Cont’d)


X Financial Report



(3) Related party lending and borrowing

Unit: RMB

Related partyBorrowing

amountStarting

date Expiry date Description

Lending Weifang Sime Darby West Port Co., Ltd. 59,500,000.00 2018/07/09 2022/07/08

(4) Interest on related party lending and borrowing

Unit: RMB

Related partyRelated party

transactionAmount for the period


Weifang Sime Darby West Port Co., Ltd. Interest income 1,980,057.34 1,794,916.65


X Financial Report


6. Related party accounts receivable and accounts payable

(1) Accounts receivables

Unit: RMB

Closing balance Opening balanceItem Book balance Bad debt Book balance Bad debt

Accounts receivable:Shouguang Chenming Huisen New-style Construction Materials Co., Ltd. 1,548,830.12 82,185.06 2,008,185.60 61,132.76Shouguang Huixin Construction Materials Co., Ltd. 24,103,255.17 2,298,275.87

Total 25,652,085.29 2,380,460.92 2,008,185.60 61,132.76

Prepayments:Jiangxi Jiuyu Energy Co., Ltd. 12,089,761.12 15,358,225.83Shouguang Hengyuan Energy Co., Ltd. 8,838,324.17 20,179,937.87

Total 20,928,085.29 – 35,538,163.70 –

Other receivables:Shouguang Hengyuan Energy Co., Ltd. 10,000,000.00 757,910.97Weifang Sime Darby West Port Co., Ltd. 66,436,602.10 5,151,661.58 64,889,583.26 5,151,661.58

Total 66,436,602.10 5,151,661.58 74,889,583.26 5,909,572.55


X Financial Report


6. Related party accounts receivable and accounts payable (Cont’d)

(2) Accounts payable

Unit: RMB

Item Related partyClosing book

balanceOpening book

balance

Accounts payable: Weifang Xingxing Joint Chemical Co., Ltd. 26,905,494.34 26,905,494.34Accounts payable: Jiangxi Jiuyu Energy Co., Ltd. 4,067,576.01 3,054,956.65Accounts payable: Jiangxi Chenming Port Co., Ltd. 910,329.34

Total 31,883,399.69 29,960,450.99

Other current liabilities Guangdong Nanyue Bank Co., Ltd. 400,000,000.00 400,000,000.00

Total 400,000,000.00 400,000,000.00

(3) Deposits with related parties

Unit: RMB

Related party Related party transactionClosing book

balanceOpening book

balance

Bank deposit Guangdong Nanyue Bank Co., Ltd. 83,915.75 85,668.46Other monetary funds Guangdong Nanyue Bank Co., Ltd. 1,964,668,000.00 2,414,668,000.00

(4) Loans from related parties

Unit: RMB

Item name Related partyClosing book

balanceOpening book

balance

Short-term borrowings Guangdong Nanyue Bank Co., Ltd. 2,598,668,000.00 2,948,970,000.00


X Financial Report

XIII. Share-based payment

1. General information of share-based payment


Unit: RMB

Total equity instruments of the Company granted during the period 226,860,000

On 29 May 2020, the Company disclosed the Announcement on Grant of Restricted Shares to Participants and determined to grant 79,600,000 restricted shares to 111 participants at the grant price of RMB2.85 per share. On 9 July 2020, the Company disclosed the announcement on Completion of Registration of the Grant of the 2020 Restricted A Shares. The restricted shares will be unlocked respectively after 24 months, 36 months and 48 months from the date of completion of the registration of the restricted shares under the grant.

2. Equity-settled share-based payment


Unit: RMB

The method of determining the fair value of equity instrument on the grant date

The Company chooses to calculate the fair value based on the closing price of

the Company’s shares on the grant date deducting the grant price

Basis for determining the quantity of exercisable equity instruments Based on subsequent information such as the latest changes in the number of

participants who are entitled to exercise and the completion status of

performance targetsReasons for significant difference between the current estimate and

previous estimateNone

Accumulated amount of equity-settled share-based payment included in the capital reserve

146,264,104

Total amount of equity-settled share-based payment recognised in the current period

34,443,000


X Financial Report

XIV. Undertaking and contingency

1. Significant commitments

(1) Capital commitment


Commitments in relation to acquisition and construction of long-term assets 360,655,698.54 260,421,348.84

Total 360,655,698.54 260,421,348.84

2. Contingency

Contingent liabilities arising from pending litigation and its financial impacts

In October 2005, the Company and Hong Kong ArjowigginsHKK2Limited (“HKK2”) jointly established Arjo Wiggins Chenming Specialty Paper Co., Ltd. in Shouguang, Shandong Province, which is engaged in the production of special paper, decoration paper and draft paper. However, such company experienced poor management due to financial crisis. Hence, such company was forced to dissolve in October 2008.

In October 2012, HKK2 submitted for arbitration application to Hong Kong International Arbitration Centre, Hong Kong Special Administration of PRC, on the ground of default of the joint venture agreement by the Company. In November 2015, Hong Kong International Arbitration Centre announced arbitration result, stating that the Company should compensate HKK2 with economic loss of RMB167 million, arbitration fee of HK$3.30 million and legal fee of USD3.54 million, together with interest thereon calculated at 8% per annum. In October 2016, the Company received a statutory demand, stating that if the Company fails to perform the arbitration results within 21 days, the liquidation application on H shares of the Company will be submitted. Subsequently, HKK2 submitted H shares liquidation application to the arbitration centre.

In November 2016, the Company submitted application to the Court of First Instance of the High Court of the HKSAR and received an injunction, stating that “the applicant is prohibited from applying for liquidation on the Company”.

In February 2017, HKK2 submitted an appeal to the court. In June 2017, the court dismissed the injunction received by the Company. In the same month, the Company received the liquidation application submitted by the defendant to the High Court of Hong Kong, which alleged that the Company should compensate the defendant with economic loss of RMB167 million, legal fee of USD3.54 million and arbitration fee of HK$3.30 million, together with interest thereon due to failure in compliance of the arbitration results.

In September 2017, the Company procured a deposit of HK$389 million to the High Court of Hong Kong, and appealed against the injunction to the court. In May 2018, the court session of the case commenced. At present, the injunction case is still in progress.

In 2017, the Company made provision of RMB325,259,082.28 for the expected liability arising from this litigation. However, as at 30 June 2020, judgment of the court of Hong Kong is yet to be made, and the expected loss is uncertain. Hence, such expected liability is still stated under the balance sheet.


X Financial Report

XV. Post-balance sheet events

As of 10 August 2020 (the date of approval of the report by the Board of Directors), the Group has no events that should be disclosed after the balance sheet date.

XVI. Other material matters

1. Segment information

(1) Basis for determination and accounting policies

According to the Group’s internal organizational structure, management requirements and internal reporting system, the Group’s operating business is divided into 5 reporting segments. These report segments are determined based on the financial information required by the company’s daily internal management. The management of the Group regularly evaluates the operating results of these reporting segments to determine the allocation of resources to them and evaluate their performance.

The Group’s reporting segments include:

(1) Machine paper segment, which is responsible for production and sales of machine paper;

(2) Financial services segment, which provides financial services;

(3) Investment real estate segment, which is responsible for real estate rental;

(4) Other segments, which is responsible for the above segments otherwise.

Segment report information is disclosed in accordance with the accounting policies and measurement standards adopted by each segment when reporting to management. These accounting policies and measurement basis are consistent with the accounting policies and measurement basis used in preparing the financial statements.

(2) Financial Information of Reporting Segment

Unit: RMB’ 0,000

ItemMachine

paperFinancial Services

Investment real estate Others

Inter-segment offset Total

Revenue from principal activities 1,219,124.98 80,275.71 3,567.20 45,013.05 52,343.59 1,295,637.35Costs of principal activities 935,107.60 47,183.26 6,399.64 39,695.04 57,817.01 970,568.53Total assets 9,494,702.87 2,674,717.40 565,998.03 509,033.89 3,341,044.22 9,903,407.97Total liabilities 6,753,299.01 1,306,696.34 314,968.25 286,852.27 1,383,568.99 7,278,246.88


X Financial Report

XVI. Other material matters (Cont’d)

2. Government Subsidies

(1) Government subsidies included in deferred income will be subsequently measured using the gross method

Unit: RMB

Liability itemOpening balance

New grants for the period

Include in other income for the period

Other changes

Closing balance

Asset-related/income-

related

National Science and Technology Support Program Project Funding 1,452,525.00 82,350.00 1,370,175.00 Asset-relatedSewage treatment and water saving reconstruction 63,274,136.71 1,588,476.44 61,685,660.27 Asset-relatedFinancial subsidies for technical transformation project 168,182,448.80 28,360,000.00 6,391,903.86 190,150,544.94 Asset-relatedFunding for environmental protection 700,228,305.19 24,595,985.84 675,632,319.35 Asset-relatedIndustrial logistics park reconstruction compensation 51,960,000.00 51,960,000.00 Asset-relatedZhanjiang integrated forestry, pulp and paper project 67,047,201.50 10,098,654.93 56,948,546.57 Asset-relatedHuanggang pulp-forestry-paper project 681,564,072.66 11,359,401.20 670,204,671.46 Asset-relatedOthers 37,304,645.25 794,727.54 36,509,917.71 Asset-related

Total 1,771,013,335.11 28,360,000.00 54,911,499.81 51,960,000.00 1,692,501,835.30

(2) Government subsidies calculated into the current profit and loss using the total method

Unit: RMB

Subsidy Item Type

Amount credited to

profit or loss for the prior period

Amount credited to

profit or loss for the period

Presentable items included in profit or loss

Asset-related/revenue-related

Interest subsidy Financial appropriation 1,087,500.00 Finance expenses Asset-relatedRisk subsidy Financial appropriation 19,980,000.00 Other income Income-relatedTax rebate Tax rebate 33,984,039.89 62,377,043.64 Non-operating income

and other incomeIncome-related

Enterprise reform and development subsidies

Financial appropriation 160,161,518.76 80,837,506.25 Non-operating income and other income

Income-related

Government awards Financial appropriation 10,000.00 5,845,000.00 Non-operating income Income-relatedAfforestation subsidy Financial appropriation 588,512.58 3,252,768.00 Other income Income-relatedValue-added tax rebate Tax rebate 275,104.76 1,380,000.00 Other income Income-relatedEmployment subsidy Financial appropriation 135,853.85 3,725,651.13 Non-operating income


Final payment of relocation compensation Financial appropriation 533,390,000.00 Non-operating income Income-relatedFunding for environmental protection Financial appropriation 36,428,597.00 1,000,000.00 Non-operating income Income-relatedResearch and development grants Financial appropriation 392,300.00 Non-operating income Income-relatedOthers Financial appropriation 46,886.89 513,387.38 Non-operating income


Total 232,022,813.73 713,388,856.40


X Financial Report

XVI. Other material matters (Cont’d)

3. Net Current Assets and Total Assets less Current Liabilities

(1) Net current assets

Unit: RMB’0,000

2020.06.30 2019.12.31

Current assets 4,714,918.30 4,495,243.39Less: Current liabilities 5,693,367.00 5,269,876.89

Net current assets -978,448.70 -774,633.50

(2) Total assets less current liabilities

Unit: RMB’0,000

2020.06.30 2019.12.31

Total assets 9,903,407.97 9,795,890.99Less: Current liabilities 5,693,367.00 5,269,876.89

Total assets less current liabilities 4,210,040.97 4,526,014.10


X Financial Report

XVII. Notes to major financial statement items of the parent company


(1) Accounts receivable by category

Unit: RMB


Book balance Bad debt provision Book balance Bad debt provision

Category Amount Percentage Amount Percentage

Carrying

amount Amount Percentage Amount Percentage

Carrying

amount


individually for impairment 5,000,000.00 0.52% 5,000,000.00 100.00% 778,063.57 1.73% 778,063.57 100.00%


collectively for impairment 957,744,376.63 99.48% 4,723,988.82 0.92% 953,020,387.81 44,083,258.79 98.27% 4,878,588.79 11.07% 39,204,670.00

Of which:

Receivables from related

parties 446,319,284.22 46.36% 276.00 0.00% 446,319,008.22 31,427,654.36 70.06% 157,138.27 0.50% 31,270,516.09

Receivables from dealer

customers 511,425,092.41 53.12% 4,723,712.82 0.92% 506,701,379.59 12,655,604.43 28.21% 4,721,450.52 37.31% 7,934,153.91

Total 962,744,376.63 100.00% 9,723,988.82 1.88% 953,020,387.81 44,861,322.36 100.00% 5,656,652.36 12.61% 39,204,670.00

Items assessed individually for impairment:

Unit: RMB

Closing balance

NameBook

balanceBad debt provision


Reasons for provision

Ningxia Lingwu Baota Dagu Storage and Transportation Co., Ltd.

5,000,000.00 5,000,000.00 100.00% Due to poor management, the

financial indicators of the company

deteriorated and its repayment ability

substantially declined

Total 5,000,000.00 5,000,000.00 – –


X Financial Report

XVII. Notes to major financial statement items of the parent company (Cont’d)


(1) Accounts receivable by category (Cont’d)

Items assessed collectively for impairment:

Accounts receivable with collective provision for bad debts based on receivables from related parties:

Unit: RMB

Closing balance

Name Book balanceBad debt provision


Within 1 year 446,319,284.22 276.00 0.00%

Total 446,319,284.22 276.00 –

Accounts receivable with collective provision for bad debts based on receivables from dealer customers:

Unit: RMB

Closing balance

Name Book balanceBad debt provision


Within 1 year 511,425,092.41 4,723,712.82 0.92%

Total 511,425,092.41 4,723,712.82 –

By ageing

Unit: RMB

Ageing Closing balance

Within 1 year (including 1 year) 953,020,387.81

Total 953,020,387.81


X Financial Report



(2) Provision, recovery or reversal of bad debt provision for the period

Unit: RMB




Closing balance

Bad debt provision for accounts receivable 5,656,652.36 4,067,336.46 9,723,988.82

Total 5,656,652.36 4,067,336.46 9,723,988.82

(3) Top five accounts receivable based on closing balance of debtors

The top five accounts receivable based on closing balance of debtors for the period amounted to RMB509,639,869.96 in total, accounting for 98.69% of the total closing balance of accounts receivable. The closing balance of the corresponding bad debt provision amounted to RMB9,422,600.00 in total.


Unit: RMB


Other receivables 13,615,203,417.43 13,975,590,537.58

Total 13,615,203,417.43 13,975,590,537.58

(1) Other receivables

1) Other receivables by nature

Unit: RMB

NatureClosing book

balanceOpening book

balance

Open credit 13,530,563,966.51 13,888,363,610.88Guarantee deposit 52,295,446.66 5,379,025.93Advances 519,489.32Insurance premium 1,692,817.38 13,786.37Reserve and borrowings 9,505,097.32 7,978,371.88Others 21,146,089.56 73,336,253.20

Total 13,615,203,417.43 13,975,590,537.58


X Financial Report




2) Particulars of bad debt provision

Unit: RMB



next 12 months


credit-impaired)

ECLs over the entire life (credit-

impaired) Total

Balance as at 1 January 2020 192,610,311.65 2,790,901.12 195,401,212.77Balance as at 1 January 2020 for the period – – – –– Transferred into Phase 2– Transferred into Phase 3 2,790,901.12 2,790,901.12– Reversal to Phase 2– Reversal to Phase 1 192,610,311.65 192,610,311.65Provision for the periodReversal for the period 14,305,237.97 14,305,237.97Transfer for the periodWrite-off for the periodOther changes

Balance as at 30 June 2020 178,305,073.68 2,790,901.12 181,095,974.80

Changes in book balances with significant changes in loss provision for the period


By ageing

Unit: RMB

Ageing Book balance

Within 1 year (including 1 year) 13,543,034,435.301 – 2 years 47,804,128.412 – 3 years 24,364,853.72

Total 13,615,203,417.43


X Financial Report




3) Provision, recovery or reversal of bad debt provision for the period

Provision of bad debt provision for the period:

Unit: RMB




Closing balance

Bad debt provision for other receivables 195,401,212.77 14,305,237.97 181,095,974.80

Total 195,401,212.77 14,305,237.97 181,095,974.80

4) Top five other receivables according to closing balance of debtors

Unit: RMB

Name of entity Nature Closing balance Maturity

Percentage to closing balance

of other receivables

Closing balance of bad debt

provision

Shanghai Chenming Financial Leasing Co., Ltd. Open credit 3,559,000,000.00 Within 1 year 24.99% 17,795,000.00Shandong Chenming Financial Leasing Co., Ltd. Open credit 1,974,869,546.02 Within 1 year 13.87% 9,874,347.73Shanghai Chenming Industrial Co., Ltd. Open credit 1,634,234,658.73 Within 1 year 11.47% 8,171,173.29Zhanjiang Chenming Pulp & Paper Co., Ltd. Open credit 1,397,791,325.58 Within 1 year 9.81% 6,988,956.63Shouguang Chenming Import and Export Trade Co., Ltd Open credit 1,154,508,529.76 Within 1 year 8.11% 5,772,542.65

Total – 9,720,404,060.09 – 68.25% 48,602,020.30


Unit: RMB


ItemBook

balanceImpairment

provisionCarrying amount

Book balance

Impairment provision

Carrying amount

Investment in subsidiaries 23,343,942,649.90 23,343,942,649.90 23,275,652,649.90 23,275,652,649.90Investment in associates and joint ventures 357,261,245.00 5,994,545.96 351,266,699.04 360,122,213.93 5,994,545.96 354,127,667.97

Total 23,701,203,894.90 5,994,545.96 23,695,209,348.94 23,635,774,863.83 5,994,545.96 23,629,780,317.87


X Financial Report



(1) Investment in subsidiaries

Unit: RMB

Investee Opening balanceIncrease for

the yearDecrease for

the yearClosing balance


the year

Closing balance provision of impairment

Chenming Paper Korea Co., Ltd. 6,143,400.00 6,143,400.00Chenming GmbH 4,083,235.00 4,083,235.00Shandong Chenming Paper Group (Fuyu) Sales Co., Ltd. 1,000,000.00 1,000,000.00Hailaer Chenming Paper Co., Ltd. 12,000,000.00 12,000,000.00Huanggang Chenming Pulp & Paper Co., Ltd. 2,250,000,000.00 50,000,000.00 2,300,000,000.00Huanggang Chenming Arboriculture Development Co., Ltd. 70,000,000.00 70,000,000.00Jilin Chenming Paper Co., Ltd. 1,501,350,000.00 1,501,350,000.00Jinan Chenming Investment Management Co., Ltd. 100,000,000.00 100,000,000.00Jiangxi Chenming Paper Co., Ltd. 822,867,646.40 822,867,646.40Shandong Chenming Power Supply Holdings Co., Ltd. 157,810,117.43 157,810,117.43Wuhan Chenming Hanyang Paper Holdings Co., Ltd. 264,493,210.21 264,493,210.21Shandong Grand View Hotel Co., Ltd. 80,500,000.00 80,500,000.00Zhanjiang Chenming Pulp & Paper Co., Ltd. 5,055,000,000.00 27,500,000.00 5,082,500,000.00Shouguang Chenming Modern Logistic Co., Ltd. 10,000,000.00 10,000,000.00Shouguang Chenming Art Paper Co., Ltd. 113,616,063.80 113,616,063.80Shouguang Meilun Paper Co., Ltd. 4,449,441,979.31 4,449,441,979.31Shouguang Shun Da Customs Declaration Co, Ltd. 1,500,000.00 1,500,000.00Shandong Chenming Paper Sales Co., Ltd. 762,641,208.20 762,641,208.20Shouguang Chenming Import and Export Trade Co., Ltd. 250,000,000.00 250,000,000.00Shouguang Chenming Papermaking Machine Co., Ltd. 2,000,000.00 2,000,000.00Shouguang Chenming Industrial Logistics Co., Ltd. 10,000,000.00 10,000,000.00Shouguang Chenming Hongxin Packaging Co., Ltd. 3,730,000.00 3,730,000.00Shandong Chenming Group Finance Co., Ltd. 4,000,000,000.00 4,000,000,000.00Chenming Arboriculture Co., Ltd. 45,000,000.00 45,000,000.00Shanghai Chenming Industrial Co., Ltd. 3,000,000,000.00 3,000,000,000.00Chenming (HK) Limited 118,067,989.55 118,067,989.55Chenming Paper USA Co., Ltd. 6,407,800.00 6,407,800.00Shandong Chenming Coated Paper Sales Co. Ltd. 20,000,000.00 20,000,000.00Weifang Chenming Growth Driver Replacement Equity Investment Fund Partnership (Limited Partnership) 158,000,000.00 790,000.00 158,790,000.00

Total 23,275,652,649.90 78,290,000.00 10,000,000.00 23,343,942,649.90


X Financial Report



(2) Investment in associates and joint ventures

Unit: RMB

Change for the period

InvesteeOpening balance

Additional contribution

Withdrawn contribution

Investment gain or loss recognised

under equity method

Adjustment of other

comprehensive income

Other change

in equity interest

Distribution of cash

dividend or profit

declaredImpairment

provision OthersClosing balance

Closing balance of

impairment provision

I. Joint venturesShouguang Chenming Huisen New-style Construction Materials Co., Ltd. 3,789,667.61 740,169.16 1,200,000.00 3,329,836.77Weifang Sime Darby West Port Co., Ltd. 89,726,671.76 -2,880,211.17 86,846,460.59

Subtotal 93,516,339.37 -2,140,042.01 1,200,000.00 90,176,297.36

II. AssociatesJiangxi Jiangbao Media Colour Printing Co., Ltd. 0 0Zhuhai Dechen New Third Board Equity Investment Fund Company (Limited Partnership) 52,412,989.91 -30,470.86 52,382,519.05Ningbo Kaichen Huamei Equity Investment Fund Partnership (Limited Partnership) 199,528,847.52 516,198.50 200,045,046.02Xuchang Chenming Paper Co., Ltd. 5,994,545.96Chenming (Qingdao) Asset Management Co., Ltd. 8,669,491.17 -6,654.56 8,662,836.61

Subtotal 260,611,328.60 0.00 0.00 479,073.08 0.00 0.00 0.00 0.00 0.00 261,090,401.68 5,994,545.96

Total 354,127,667.97 0.00 0.00 -1,660,968.93 0.00 0.00 1,200,000.00 0.00 0.00 351,266,699.04 5,994,545.96


X Financial Report


4. Other payables

Unit: RMB


Interest payable 109,263,749.98 127,278,083.35Dividend payable 610,109,667.16Other payables 3,672,958,735.20 6,299,370,764.60

Total 4,392,332,152.34 6,426,648,847.95

Other payables of the top five closing balances collected by the payee

Unit: RMB

Name of company Closing balance

Jiangxi Chenming Paper Co., Ltd. 1,655,496,622.33Shouguang Meilun Paper Co., Ltd. 950,951,379.11Jilin Chenming Paper Co., Ltd. 233,624,654.50Shandong Chenming Power Supply Holdings Co., Ltd. 146,387,007.68Sutai (Hangzhou) Investment Management Co., Ltd. 100,000,000.00

Total 3,086,459,663.62

5. Revenue and operating costs

Unit: RMB

Amount for the period Amount for the prior periodItem Revenue Costs Revenue Costs

Principal activities 3,138,096,400.01 2,435,165,869.61 2,237,163,494.68 1,674,925,035.20Other activities 709,097,257.52 593,307,602.81 458,848,921.42 428,362,116.44

Total 3,847,193,657.53 3,028,473,472.42 2,696,012,416.10 2,103,287,151.64

6. Investment income



Income from long-term equity investments accounted for using the cost method 681,230,000.00 1,023,353,000.00Income from long-term equity investments accounted for using the equity method -1,660,968.93 -12,799,856.43Investment gain on disposal of long-term equity investments 3,100,000.00

Total 682,669,031.07 1,010,553,143.57


X Financial Report

XVIII. Supplementary information

1. Breakdown of extraordinary gains and losses for the current period


Unit: RMB

Item Amount

Profit or loss from disposal of non-current assets 13,758,306.22Government grants (except for the government grants closely related to the normal operation

of the Company and granted constantly at a fixed amount or quantity in accordance with a certain standard based on state policies) accounted for in profit or loss for the current period 767,184,012.96

Gain or loss from change in fair value of consumable biological assets and other non-current financial assets by adopting fair value method for subsequent measurements -9,246,743.86

Other gain or loss items within the definition of extraordinary gain or loss -2,416,979.09Less: Effect of income tax 179,535,882.21 Effect of minority interest 141,298,126.77

Total 448,444,587.25

Notes for the Company’s extraordinary gain or loss items as defined in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No. 1 – Extraordinary Gains or Losses and the extraordinary gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No. 1 – Extraordinary Gains or Losses defined as its recurring gain or loss items.


2. Return on net assets and earnings per share

Earnings per share

Profit for the reporting period

Rate of return on net assets on weighted

average basisBasic

(RMB per share)Diluted

(RMB per share)

Net profit attributable to ordinary shareholders of the Company 0.84% 0.051 0.051

Net profit after extraordinary gains and losses attributable to ordinary shareholders of the Company -1.69% -0.103 -0.103

Note: The net profit attributable to shareholders of the listed company has not deducted perpetual debt incurred interest and impact of dividends issued and declared by preference shares. When calculating the financial indicators of earnings per share and weighted average return on equity, the interest on perpetual bonds of RMB96,734,246.58 from 1 January 2020 to 30 June 2020 and the dividends issued and declared by preference shares of RMB270,776,073.42 in 2020 are deducted.

3. Differences in accounting data under domestic and overseas accounting standards

(1) Differences between the net profit and net assets disclosed in accordance with international accounting standards and China accounting standards in the financial report


(2) Differences between the net profit and net assets disclosed in accordance with overseas accounting standards and China accounting standards in the financial report



XI Documents Available for Inspection

(I) The financial statements signed and sealed by the legal representative, financial representative and head of the financial department of the Company;

(II) The interim report signed by the legal representative;

(III) The original copies of all of the documents and announcements of the Company disclosed on the designated website as approved by China Securities Regulatory Commission during the reporting period;

(VI) The interim report disclosed on The Stock Exchange of Hong Kong Limited;

(V) Other relevant information.